In today’s aggressive housing market, it’s crucial to stay ahead of the competition and take advantage of all the options available for financial assistance. For Native American home buyers, there are several loan programs to help secure financing and secure a mortgage with affordable interest rates. These mortgages are specifically designed for Native American and Alaska Native families, Alaskan Villages, Tribes, or Tribal Designated Housing Entities.
We spoke to finance experts for details on the top three homebuyer programs available exclusively to members of federally recognized tribes.
Section 184 Indian Home Loan Guarantee Scheme
Section 184 is a federal home loan program that allows eligible applicants to obtain loans for properties both off and on Native lands.
Eligible properties include new homes, homes to be renovated (referred to as “rehabilitation” in loan terms) and existing homes. The funds can also be used to refinance an existing home.
“Section 184 makes it easy for Native Americans to buy homes without going through complicated paperwork,” says Adam Garcia, CEO of The Stock Dork. “And it reassures lenders that their investment will yield favorable returns in the event of a foreclosure.
“In addition, the US Department of Housing and Urban Development monitors financing options and ensures that the applicant meets all requirements,” adds Garcia.
Using a Section 184 loan offers the following benefits:
- Low down payment: Buyers pay 2.25% down payment on loans over $50,000 and 1.25% on loans under $50,000.
- Low interest rates: The loan rate is based on market rates instead of the applicant’s credit score.
- Manual subscription: The loan takes a hands-on approach to underwriting and approval, as opposed to automated decision-making tools, which may disqualify some buyers.
- Protection against predatory lending: The program tracks fees Approved Lenders may charge Aboriginal borrowers. (Section 184 loans cannot be used for adjustable rate mortgages.)
How to qualify: To apply for a Section 184 loan, you must be part of a federally recognized tribe and be in the process of purchasing a home to be your primary residence.
Native American Direct Loan
For those who served in the military, the Native American Direct Loan program offers a low-interest 30-year fixed rate mortgage. Some benefits of NADL include no down payment required, no private mortgage insurance required, and limited closing costs.
“Through NADL, eligible applicants can obtain loans on affordable terms to buy a home or fund ongoing home loans,” says Alex Williams, CFO of FindThisBest. “NADL loans can also be used to rebuild a house.”
Note that these loans are for buyers who intend to live in the home they plan to buy, build or improve instead of renting the home for profit.
How to qualify: In addition to proving your membership in a federally recognized tribe, you will need a valid certificate of eligibility for a VA home loan to qualify for this program. Additionally, you will need to meet NADL credit standards to prove that you earn enough to cover mortgage payments and costs associated with owning a home.
Native American Home Ownership Initiative
First-time home buyers can look into the Native American Homeownership Initiative, a grant program run by the Federal Home Loan Bank of Des Moines and its partner banks. This program is designed specifically for first-time home buyers from Native American, Hawaiian, or Alaskan Native communities. Since 1995, FHLBDM has helped more than 20,000 families obtain housing finance.
“Under this program, eligible individuals receive $15,000 for a down payment and assistance with closing costs,” says Jessica Chase, lending and financing expert at Premier Title Loans. “Additionally, it also improves the loan-to-value ratio of mortgages.”
An LTV ratio is the amount you borrow from your lender, divided by the purchase price of the home, which is then expressed as a percentage. Translation: You won’t necessarily need to make the standard 20% down payment (equivalent to an 80% LTV ratio) on your loan if you receive NAHI assistance.
How to qualify: Once you complete an application, you will also need to meet program income requirements and complete a buyer education course.
The bottom line
This list is by no means exhaustive when it comes to financial assistance programs available, especially for first-time home buyers. In addition to these national programs, you may also be eligible for specific state programs and local assistance programs through your bank.
“Several Native American-owned banks, such as Bank of Cherokee County and AllNations Bank, offer different programs for tribal members,” Chase explains.
For more information about homeowner assistance programs you may qualify for, consider contacting one of HUD’s free counseling agencies.
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