Section 184: Home Loans Exclusively for Native Americans

April 8, 2020 — 4 min read

The Section 184 Loan Guarantee Program is exclusively available for Native Americans or Alaska Natives as members of federally recognized tribes. The Housing and Community Development Act of 1992 created this program to address the lack of mortgages in Indian Country.

Why is mortgage lending unavailable in Indian Country?

The majority of the land in Indian Country is held in two ways. Mainly, the United States government owns the land in trust for the benefit of a particular tribe. The majority of the remainder of the tribal land is held in trust for the benefit of individual Native Americans. Due to its tribal trust status, lenders cannot legally mortgage that land. Additionally, land held in trust for an individual must receive approval from the Bureau of Indian Affairs (BIA). Therefore, since lenders are not able to mortgage and foreclose on a home, or place a lien on individual trust property, they're not traditionally able to offer home loans to individual Native Americans.

How does a Section 184 Home Loan work around this issue?

Section 184 loans are available for use both on and off tribal land. The eligible applicant leases the land from the tribe for 50 years. The mortgage applies to the home and the leasehold interest, but not the land itself. Henceforth, the land remains in trust for the tribe. The Section 184 loan exists to secure against the leasehold interest instead of the land.

Section 184 is a HUD Loan, but not FHA

Although many of the loan attributes and requirements are similar to FHA mortgages, it's important to note that a Section 184 loan is not an FHA loan. These loans come from HUD's Office of Native American Programs. An eligible applicant applies for the loan with a lender while working with the tribe and Bureau of Indian Affairs. The lender evaluates the loan documentation and subsequently submits the loan for approval from HUD's Office of Loan Guarantee.

Down Payments and Underwriting Requirements

The Section 184 loan requires a lower down payment than conventional or FHA loans. For a loan amount over $50,000, the down payment is 2.25% of the sales price. Additionally, for a loan amount under $50,000, the down payment is 1.25% of the sales price. Even better news: applicants can use either gift funds or grants for the down payment if they don't have all their funds available. The underwriting requirements for a Section 184 loan are also different than all other loan types. They're more flexible on Bankruptcy timeline requirements, and minimum required credit accounts.

Eligible Applicants and Properties

The applicant must be an American Indian or Alaska Native who is a member of a federally recognized tribe. For the complete list of federally recognized tribes, click here. Eligible property must meet FHA construction and safety codes. Applicants must live in the home as their primary residence; therefore, the Section 184 loan is not for second homes or rental properties. However, as long as the buyers live in one of the units, the house may have up to 4 units. Land must also be located within an eligible area. For more information, you can click here for a list of eligible areas.

Ineligible Loan Attributes

The Section 184 loan is for fixed-rate loans only, so this program does not allow Adjustable Rate Mortgages (ARMs) or Interest-Only loans. Likewise, commercial properties are ineligible for this program. The maximum loan limits also vary by county. You can click here for a list to find out what the limit is for your county. The Section 184 loan is a unique way for Native Americans to buy their own homes. Not all lenders can offer this loan, and this loan program is one of a kind.

Do you have questions about how the Section 184 Loan could work for you? Fill out the form below or contact us today!