Section 184 Home Loans for Native Americans and Alaska Natives

• Banks are usually unable to lend conventional mortgages on original land because of how the land is owned.
• Section 184 loans make home financing on hold possible.
• Only Native Americans and Alaska Natives in federally recognized tribes can obtain a Section 184 loan.

Most of the land owned by Native Americans is held in a trust for tribes or individuals by the United States government. Therefore, depending on how exactly the land is acquired, getting a mortgage may not be an option.

“It is, in fact, in many respects impossible to obtain a conventional mortgage loan on reserved land,” says Laurie Garza, vice president and director of retail mortgage production at Chickasaw Community Bank, a Section 184 lender.

Section 184 loans enable lenders to finance home purchases on Native lands and help make home ownership more achievable for Native Americans. Without this program, many tribal communities would not be able to obtain financing to purchase a home, which would deprive many of them of owning homes and the wealth building that goes with it.

What is a Section 184 loan?

Section 184 loans are real estate loans that can be used to purchase homes on and off Native American reservations. Created to increase access to mortgage loans for properties on Native lands, these loans provide an affordable way for Native Americans and Alaska Natives to become homeowners.

How does Section 184 . work?

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

So why is traditional mortgage lending so difficult on local land? If the land was owned by a clan clan, then that land could not be mortgaged. Section 184 loans enable mortgage lending on this land because the mortgage is not secured by the land but by a lease. This prevents the lender from being able to take possession of the original land in the event of foreclosure.

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

How do I qualify for a Section 184 loan?

Section 184 loans are available only to Native Americans, Alaska Natives, tribes, tribally defined housing entities, and Native American housing authorities. Federal tribes must also be recognized to qualify. Native Hawaiians can obtain mortgages through the Section 184A program.

As with most mortgages, you must have

push down

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 province
• Credit: No minimum score
• Debt-to-income ratio: 41%; or 43% with compensating factors
• Ownership: 1 to 4 units of a single-family home; It should be a basic residence and “modest in size and design”
• Fee: One-time warranty fee of 1.5%
• Mortgage Insurance: 0.25% annual premium on a mortgage if you have less than 22% of equity

According to Garza, instead of looking at the applicant

Balance level

Underwriters will assess the applicant’s debt sustainability. They will look at the applicant’s debt-to-income ratio and the assets they own that can be used to make a down payment,

closing costs

and reserves.

“This loan program does not focus on credit score as much as credit history,” Garza says. “This is one of the advantages of the product.”

Section 184 loans are not available in every state. Some states have only partial approval, with loans available only in approved counties and cities.

States with full consent under Section 184 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 with 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 Program

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 loan programs,” Garza says.

The minimum down payment for a Section 184 loan is lower than that of FHA loans and conventional loans, which require a minimum of 3.5% and 3%, respectively. Their fees and mortgage insurance costs are lower than other mortgage types as well.

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

If your balance is less than ideal, you don’t have to worry about it affecting your interest rate. Section 184 rates are based on market rates, not your credit.

How to apply for a loan Article 184

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

The Home Buyer Education course is not required for applicants, but is recommended. These courses are often offered free of charge. Your tribe or HUD-certified housing advisor may be able to help you find one, or you can search online.