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- Banks are typically unable to lend traditional mortgages on native land because of how the land is owned.
- Section 184 loans make financing a home on a reservation possible.
- Only Native Americans and Alaska Natives in federally recognized tribes can get a Section 184 loan.
Much of the land that belongs to Native Americans is held in a trust for tribes or individuals by the U.S. government. So depending on exactly how the land is held, getting a mortgage might not be an option.
"It's impossible, actually, in many regards, to get a traditional mortgage loan on reservation land," says Lori Garza, vice president and retail mortgage production manager at Chickasaw Community Bank, a Section 184 lender.
Section 184 loans enable mortgage lenders to finance home purchases on native lands and help make homeownership more attainable for Native Americans. Without this program, many tribal communities wouldn't be able to access financing to purchase a home, shutting many of them out from homeownership and the wealth-building that comes with it.
What is a 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 mortgage lending for property on native lands, and they offer an affordable way for Native Americans and Alaska Natives to become homeowners.
The Section 184 Indian Home Loan Guarantee Program is managed by the U.S. Department of Housing and Urban Development. These mortgages are offered through private lenders and are guaranteed by HUD's Office of Native American Programs. This means that you won't get a Section 184 loan directly from the government — you'll work with a participating lender instead.
So why is traditional mortgage lending so difficult on native lands? If the land is held in a trust for a tribe, that land can't be mortgaged. Section 184 loans enable mortgage lending on this land because the mortgage is secured not by the land but by a leasehold. This prevents the lender from being able to seize native land in the event of foreclosure.
Section 184 loans are fixed-rate mortgages that are available in terms of up to 30 years.
Benefits of a section 184 loan
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.
Low down payment requirements
The minimum down payment on a Section 184 loan is lower than FHA and conventional loans, which require at least 3.5% and 3% down respectively. Its fees and mortgage insurance costs are lower than other mortgage types as well.
Competitive interest rates
If your credit is less than ideal, you won't have to worry about it increasing your interest rate. Section 184 rates are based on market rates, not your credit. This can allow you to get interest rates comparable to other loans on the market.
Flexible underwriting standards
Section 184 loans have no minimum credit score and can be used for a variety of purposes. In addition to using it to purchase an existing home, you can also construct a new home, rehabilitate a home (including weatherization), purchase and rehabilitate a home, or refinance an existing mortgage. You can have up to a 43% debt-to-income ratio.
Eligibility requirements for a Section 184 loan
Section 184 loans aren't available in every state. 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, Arkansas, Connecticut, Iowa, Illinois, Louisiana, Missouri, Mississippi, Nebraska, New York, Rhode Island, Tennessee, Texas, Virginia, and Wyoming.
Aside from living in a participating state, you also must meet the following Section 184 loan requirements:
Tribal membership
Section 184 loans are available only to Native Americans, Alaska Natives, tribes, tribally designated housing entities, and Native American housing authorities. Tribes must also be federally recognized to qualify. Native Hawaiians can obtain mortgages through the Section 184A program.
Income and credit requirements
As with most mortgages, you'll need to have a down 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: 1- to 4-unit single-family home; must be a primary residence and "modest in size and design"
- Fees: One-time guarantee fee of 1%, no annual fees
According to Garza, rather than looking at an applicant's credit score, underwriters will evaluate an applicant's ability to take on the debt. They'll look at the applicant's debt-to-income ratio and assets they have that can be used for a down payment, closing costs, and reserves.
"This loan program is not so focused on credit score as much as it is focused on credit history," says Garza. "That's one of the advantages of the product."
How to apply for a Section 184 loan
Here's the process for applying for a Section 184 mortgage loan:
Finding an approved lender
To apply for a Section 184 loan, you'll need to work with a participating lender. You can search HUD's list of approved lenders for Section 184 loans to find one that operates in your area. Your lender will need to verify that you're enrolled in a federally recognized tribe.
Section 184 loan application process
Once you find a lender, you'll need to fill out their application and provide details about your finances, income, debts, and the home you're looking to buy.
You will also need to have your home appraised, and pay your closing costs and down payment, though some of this can be rolled into your loan balance if you'd like.
A homebuyer education course isn't required for applicants, but is recommended. These courses are often offered for free. Your tribe or a HUD-approved housing counselor may be able to help you find one, or you can search online.
Required documentation
First and foremost, you'll need documented proof of your tribal enrollment, as well as a photo ID and Social Security card. You will also need to submit items like:
- Recent W-2s and tax returns
- Bank statements
- Pay stubs
- Asset and investment statements
The exact documents you'll need will depend on your unique scenario and lender. Ask your loan officer for a list of documents to pull together.
Section 184 loans vs. conventional loans
You typically won't be able to use traditional mortgage options like conventional loans when buying on tribal land, but it can still help to understand how Section 184 loans and these mortgages differ — just for educational purposes.
Key differences
Section 184 loans require a smaller down payment (1.25% to 2.25% of the loan amount), while conventional loans require at least 3% — or 20% if you don't want to pay for mortgage insurance.
Section 184 also doesn't consider your credit score when qualifying you or setting your rate, while conventional loans do.
Section 184 loan FAQs
A Section 184 loan is a mortgage program designed to provide financing to Native American and Alaska Native families, tribes, and housing entities.
The most important requirement for a Section 184 is that you have federally recognized tribal membership. Section 184 loans also have certain income and property criteria you'll need to meet.
Section 184 loan benefits include low down payment requirements, competitive interest rates, and flexible underwriting standards.
You can apply through an approved lender, who will guide you through the application process and required documentation.
Section 184 loans often have lower down payments and more flexible credit requirements compared to conventional loans.
