Section 184 Native American and Alaska Native Home Loans

  • Banks are generally unable to lend traditional mortgages on indigenous land due to the way the land is held.
  • Section 184 loans finance a home on a reservation.
  • Only Native Americans and Alaska Natives from federally recognized tribes can get a loan under Section 184.

Much of the land that belongs to Native Americans is held in trust for tribes or individuals by the US government. So depending on how the land is held, getting a mortgage may not be an option.

“It’s actually impossible, in many ways, to get a traditional mortgage on reserve land,” says Lori Garza, vice president and head of retail mortgage production at Chickasaw Community Bank, a section 184 lender.

Section 184 loans allow lenders to finance the purchase of a home on Native lands and help make home ownership more accessible to Native Americans. Without this program, many tribal communities would not be able to access finance to purchase a home, which would prevent many of them from accessing property and creating the wealth that comes with it.

What is an Section 184 loan?

Section 184 loans are mortgages that can be used to purchase homes both on and off Native American reservations. These loans were created to increase access to mortgages for property on Native lands, and they provide an affordable way for Native Americans and Alaska Natives to become homeowners.

How the Section 184 Program Works

The Indian Section 184 Home Loan Guarantee Scheme is operated by the US Department of Housing and Urban Development. These mortgages are offered by private lenders and are guaranteed by HUD’s Office of Native American Programs. This means you won’t get a Section 184 loan directly from the government – instead, you’ll work with a participating lender.

So why are traditional mortgages so difficult in native lands? If the land is held in a trust for a tribe, that land cannot be mortgaged. Section 184 loans allow for mortgages on this land because the mortgage is not secured by the land but by a lease. This prevents the lender from being able to seize the native land in the event of a foreclosure.

Section 184 loans are fixed rate mortgages that are available for up to 30 years.

How do I qualify for a Section 184 loan?

Section 184 loans are only available to Native Americans, Alaska Native Americans, Tribes, Tribal Designated Housing Entities, and Native American Housing Authorities. Tribes must also be federally recognized to be eligible. Native Hawaiians can get mortgages through the Section 184A program.

As with most mortgages, you will need to have a

advance payment

and meet your lender’s credit requirements.

Here are the requirements for Section 184 loans:

  • Down payment: 2.25% for loans over $50,000; 1.25% for loans under $50,000
  • Borrowing limit: varies by county
  • Credit: No minimum score
  • Debt to income ratio: 41%; or 43% with compensating factors
  • Property: Single-family house with 1 to 4 apartments; must be a primary residence and “modest in size and design”
  • Fees: One-time guarantee fee of 1.5%
  • Mortgage loan insurance: Annual mortgage loan insurance premium of 0.25% if you have less than 22% equity

According to Garza, rather than looking at a candidate’s file

credit score

, underwriters will assess the ability of the applicant to assume the debt. They will look at the applicant’s debt ratio and the assets they have that can be used for a down payment,

closing costs

and reservations.

“This loan program is not so much about credit score as it is about credit history,” says Garza. “That’s one of the benefits of the product.”

Section 184 loans are not available in all states. Some states only have partial approval, where loans are only available in approved counties and cities.

States that have full Section 184 approval include: Alaska, Arizona, California, Colorado, Florida, Idaho, Indiana, Kansas, Maine, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Utah, Washington, and Wisconsin.

States that have partial approval include: Alabama, Connecticut, Iowa, Illinois, Louisiana, Missouri, Mississippi, Nebraska, New York, Rhode Island, Texas, Virginia and Wyoming.

Benefits of Section 184 Indian Home Loan Guarantee Scheme

For those who qualify, Section 184 loans are a very affordable mortgage option.

“This loan product specifically allows Native Americans to purchase homes at a lower cost than some traditional mortgage programs,” Garza said.

The minimum down payment on a Section 184 loan is lower than that of FHA and conventional loans, which require at least 3.5% and 3% down payment, respectively. Its mortgage insurance fees and costs are also lower than other types of mortgages.

Section 184 loans can be used for a variety of purposes. In addition to using it to buy an existing home, you can also build a new home, rehab a home (including weatherization), buy and rehab a home, or refinance an existing mortgage.

If your credit isn’t ideal, you won’t have to worry about its impact on your interest rate. Section 184 rates are based on market rates, not your credit.

How to Apply for a Section 184 Loan

To apply for a Section 184 loan, you will need to work with a participating lender. You can search HUD’s Section 184 list of lenders to find one that lends in your area. Your lender will need to verify that you are enrolled in a federally recognized tribe.

A home buying education course is not mandatory for applicants, but is recommended. These courses are often offered free of charge. Your tribe or a HUD-certified housing counselor can help you find one, or you can search online.

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