If you are a Native American and have trouble getting home loan financing, there could be help with the Section 184 Home Loan program. This HUD program helps Native Americans afford home ownership by allowing low down payments and low interest rates. HUD guarantees the Section 184 Loans 100%, which means they work in much the same way that other government-backed programs, such as the FHA loan work.
Finding a Bank
HUD sets the guidelines for the Section 184 Loans and even guarantees them, but they don’t underwrite them. Instead, the funding bank does it. The banks have the final say in which loans get approved and which don’t.
It’s the lender’s job to make sure that the loan meets the Section 184 guidelines at a minimum. Lenders can add their own rules or overlays on top of it, but at a minimum they must follow the Section 184 guidelines. It’s often easier to use lenders that other tribe members have used and you may even find an approved list of lenders from your tribe.
How to Qualify
Qualifying for the Section 184 Loan means that you meet the following requirements:
- You must be a member of a Federally recognized tribe
- You don’t need a certain credit score; the bank decides if you are a good risk or not
- You will need a debt ratio that doesn’t exceed 41%, but there are exceptions to the rule, especially if you have a strong financial record
- You must live in one of the approved Section 184 states
- You should have a two-year employment history
- You can be either a first-time or repeat home buyer
- The home must be for your primary residence
The Benefits of the Section 184 Loan
If you are part of a Native American tribe, you have a low credit score, and low income, it can seem impossible to find a loan. That’s where the Section 184 loan steps in and helps. Aside from being a loan that can help Native Americans in this situation, it provides the following benefits:
- You may only need to put down 1.25% on the loan if you borrow $50,000 or less. If you borrow more than $50,000, you must make a 2.25% down payment.
- You can still qualify for the Section 184 Loan if you have bad credit. The loan program isn’t based on credit score. Lenders look at each loan individually in order to make a lending decision.
- You can buy single-family properties or 1-4 unit properties as long as you live in a unit as your primary residence.
- You can use the loan to help you pay for home renovations or rehabilitation; it isn’t just to buy a home.
- You can use the loan to build a new home or to refinance your current home.
- You can only get a fixed rate loan – adjustable rate loans aren’t allowed.
Paying Mortgage Insurance
Like most government-backed loans, you will need to pay mortgage insurance on a Section 184 Loan. First, you pay 1.5% of the loan amount at the closing. If you don’t have the money to pay the fee at closing, you can opt to roll it into your loan amount.
If you borrow more than 78% of the home’s value, you will pay monthly mortgage insurance equal to 0.25% of the loan amount. This amount changes as you pay your mortgage principal down, though. For example, if you borrow $100,000, you would pay $20 per month. As you pay the principal down, the premium you pay would decrease even further.
The Section 184 Loan is a great way to help Native Americans with poor credit and low-income get a loan. It’s a great way to get flexible financing with low, affordable interest rates. As with any loan program, make sure you shop around to find the deal that is just right for you.Click to See the Latest Mortgage Rates»