Section 184 Home Loans for Native Americans is a government program for American Indian and Alaska Natives. The program offers similar flexible guidelines as other government-backed programs along with low down payment requirements. Borrowers can live on native lands, but it’s not a requirement for the loan program. Borrowers can also use the program for many types of homes including newly built, existing, and rehab of an existing home.
The Basics of the Section 184 Loan
The Office of Native American Programs provides a guarantee to lenders that write the Section 184 loans. This guarantee provides 100% full repayment of a loan if a borrower in the program defaults. Borrowers do not apply for the loan with HUD; however, they apply with an approved lender who then works with HUD to approve your loan.
Eligible Loan Types
Borrowers of the Section 184 loans only have a few choices when it comes to the terms of their loan. Only fixed-rate loans are allowed; borrowers cannot take an adjustable rate loan. The maximum term, which is the case for most loan programs, is 30 years. The maximum loan amount allowed varies by county, which you can see here.
Who is Eligible?
The Section 184 loan is specifically for those of American Indian or Alaska Native descent. You must be in one of the following categories in order to be eligible:
- American Indian and in a recognized tribe
- Alaska Native and in a recognized tribe
- Living in the Indian Housing authorities
The Mortgage Insurance
Like most other government-backed programs, there is a fee for the program.
You will pay 1.5% of the loan amount at the closing. However, you do have the option to roll it into your loan amount if you don’t have the cash available. You will also owe a monthly mortgage insurance premium if you borrow more than 78% of the home’s value. The monthly mortgage insurance is 0.25% of the loan amount.
If you borrow $50,000, you would owe $10 per month. This amount slowly decreases as your principal balance decreases.
Just like most other government-backed programs, the Section 184 loan requires a very low down payment. For this particular program, you only need to put down 2.25% if you borrow more than $50,000 and 1.25%, if you borrow less than $50,000.
This loan program also offers very low-interest rates. One way that the rates are different is how the lender decides your given rate. For most loan programs, the lender bases your interest rate on your credit score. Lower credit scores get higher interest rates and higher scores get lower interest rates. With this program, though, everybody’s rate is based on the current market rates, not the credit score.
The Section 184 loan is also unique in the fact that they do not use an automated underwriting system. This works to your advantage as you get a human reviewing your file. A human can make exceptions when something doesn’t meet the requirements if they see a reason to grant that exception. A computer, on the other hand only sees things as black and white. If you don’t meet the requirements, you don’t get the loan. With this loan program, you don’t have to take that risk.
In order to use the Section 184 loan, you’ll need to find an approved lender. HUD has an extensive list of approved lenders. This takes a big chunk of the hard work of finding a lender off your shoulders. Just call a few of the lenders on the list that are approved to lend in your state and see which lender has the best terms and rates for you.