If you’re Native American, Alaska Native, or a Native Hawaiian and looking to buy, rehabilitate, or build a home, there are special options to help you get a mortgage and save money. Here are some tips for your particular home-buying journey.
Get to know Section 184
The U.S. Department of Housing and Urban Development created the Section 184 Indian Housing Loan Guarantee Program to help Native Americans purchase homes. Just like the VA loan program, Section 184 guarantees a lender that its investment will be repaid in full in the event of foreclosure.
The other benefits of Section 184 loans are that HUD plays watchdog for you. HUD ensures that you’re finding the best loan options and there are flexible application requirements to make it easier to get approved.
The Section 184 program is designed for eligible tribes, Indian Housing Authorities, and Native American individuals and families wanting to own a home on trust land or land located in an approved Indian or Alaska Native area. Native Hawaiians who are eligible to reside on Hawaiian Home Lands are eligible for a similar program under Section 184A, the Native Hawaiian Housing Loan Guarantee.
What limitations are there?
There are some restrictions. Only single-family homes are eligible; your mortgage must be fixed-rate for 30 years or less (other types of mortgages are not eligible); and when taking out a mortgage, you must apply with a HUD-approved Section 184 lender.
In some states, the rules have expanded to include some land beyond established tribal lands, so check out HUD’s list of guidelines for each state. Some states are even “full approval states,” meaning that any county in the state will qualify for Section 184 financing.
How much down payment is required?
For loans under $50,000, you’ll need to come up with a down payment of 1.25% of the purchase price. 2.25% is required for loans over $50,000. The money can come from your savings, investments, or a gift from a family member.
Which lenders work with Section 184?
While many mortgage lenders are on HUD’s approved list, some are more experienced with Section 184 than others. 1st Tribal Lending, for example, specializes in buyers looking to buy on or off the reservation, purchase manufactured or new construction homes, or refinancing.
Options beyond Section 184
Section 184 may be the most common program to help Indigenous home buyers, but it’s not the only one. There are also organizations dedicated to improving existing housing conditions on reservations.
One such group is Enterprise, which works with lenders and other businesses that finance, develop, manage, and build affordable housing. The organization recently developed new tools, such as a tribal leaders’ handbook on homeownership.
Federal Home Loan Banks
There’s also a private cooperative called Federal Home Loan Banks, which lends money to local lenders (banks, mortgage lenders) to help them invest in communities and buyers in need. FHL banks are located in 11 states and offer assistance through the organization’s Native American Homeownership Initiative.
Native American Direct Loan
If you’re a Native American who is also a veteran (or the spouse of a veteran), you may qualify for a loan through the Native American Direct Loan (NADL) program, which is backed by the U.S. Department of Veterans Affairs. These loans can be used to purchase, construct, or finance a home.
NADL loans have a low down payment requirement and sometimes require no down payment at all. Private mortgage insurance (PMI) is not required, and they offer lower closing costs than conventional loans. They can be used for homes on allotted lands, Alaska Native corporations, Pacific Island territories, or federally recognized trusts.
Housing grants for Native Americans
Unlike loans, housing grants do not have to be paid back. For Native Americans, there are grants to help you buy a house and grants to help you stay in a home.
If you live in a city, check with your local housing authority. If you’re on a reservation, check with your tribal office to see if there is grant money available. The website Grants for Native Americans has a list of popular grants for Native Americans for a variety of things like mortgage assistance, legal advice, help paying water and electric bills, and education. The grants are from private organizations, foundations, and nonprofits, as well as the federal government.
The Hawaii State Department of Hawaiian Home Lands receives funding for Native Hawaiian Housing Block Grant funds. These grants can cover eligible affordable housing for low-income Native Hawaiians who are eligible to live on Hawaiian homelands.