What Is the Section 184 Home Loan Program?

The Section 184 Indian Home Loan Guarantee Program is a mortgage product created specifically for American Indian and Alaska Native families. Established by Congress in 1992, the program aims to increase access to homeownership by addressing historical barriers to conventional financing, particularly on land held in trust by the federal government where lenders were hesitant to issue loans.

To address this, the Section 184 program provides a 100% guarantee to participating lenders for loans made to eligible borrowers. This guarantee, managed by the Department of Housing and Urban Development (HUD), assures the lender that their investment will be repaid if a foreclosure occurs. This federal backing encourages private lenders to extend financing, thereby expanding homeownership opportunities.

Borrower Eligibility Requirements

To qualify for a Section 184 loan, the borrower must be an enrolled member of a federally recognized American Indian or Alaska Native tribe. Verification of enrollment is a mandatory part of the application, and applicants must obtain this proof from their tribal government. This proof is typically an official tribal enrollment card or a formal letter from the tribe.

The program has flexible underwriting standards. While HUD does not set a minimum credit score, participating lenders have their own requirements and perform a manual underwriting review. This allows for a holistic assessment of an applicant’s creditworthiness and can include non-traditional sources of credit history.

Lenders will verify an applicant’s income and employment to ensure they have the financial stability to support mortgage payments. A two-year employment history with stable income is expected. The program does not have income limits. The debt-to-income ratio, which compares monthly debt to gross monthly income, is capped at 41 percent, but may be extended in some cases.

The Section 184 loan features a low down payment requirement. For loans over $50,000, the down payment is 2.25%, and for loans under $50,000, it is 1.25%. These funds can come from the borrower’s savings, gifts from family, or down payment assistance from tribes or other approved entities.

Borrowers pay a one-time upfront loan guarantee fee of 1.0% of the loan amount at closing, which can be financed into the loan. A major advantage of the program is that it does not require monthly Private Mortgage Insurance (PMI).

Approved Loan and Property Uses

The Section 184 program allows funds to be used for several housing-related purposes. Borrowers can use the loan to purchase an existing home, finance new construction, or rehabilitate a property. The loan can also be used to refinance an existing mortgage, including options for rate and term adjustments or cashing out equity.

Loans can be used for properties located both on and off native lands. However, the property must be situated within a state or county that has been approved to participate in the Section 184 program. Potential borrowers must verify that their desired property location is within an approved area.

The program is restricted to financing a borrower’s primary residence, as investment properties and second homes are not eligible. Eligible property types include one-to-four unit single-family homes and manufactured homes on a permanent foundation. All loans are fixed-rate mortgages with terms of 30 years or less; adjustable-rate mortgages (ARMs) are not permitted.

Required Information and Documentation

Before applying, prospective borrowers should gather a comprehensive set of documents. This preparation involves collecting personal and financial information to verify identity, income, and assets. Required items include:

• Proof of tribal enrollment, such as a valid tribal ID card or an official letter from the tribe
• A government-issued photo ID and a copy of a Social Security card
• W-2 statements and federal tax returns from the previous two years
• The 30 most recent pay stubs to show current income
• For self-employed applicants, two years of tax returns to document earnings
• Award letters or recent 1099 forms for other income sources, such as Social Security or disability
• Bank statements for the last two to three months for all checking and savings accounts
• The most recent statements for any retirement accounts, like a 401(k)
• The name, address, and phone number of the current landlord for rental verification

The Application and Approval Process

The first step is to find a lender approved by HUD to originate Section 184 loans; a list of participating lenders is available on HUD’s website. Once a lender is selected, the applicant submits their complete application package with all required financial and personal documentation.

After submission, the lender undertakes the underwriting process, evaluating the applicant’s credit and financial standing. The lender also orders a property appraisal to ensure it meets program standards. If the property is on tribal trust land, the borrower will also work with their tribe and the Bureau of Indian Affairs to secure an approved lease, which is typically for 50 years.

Once the lender has approved the loan, the package is submitted to HUD’s Office of Loan Guarantee for the official loan guarantee. HUD reviews the file to confirm that all program requirements have been met and issues a loan guarantee certificate to the lender. With the guarantee in place, the lender can proceed to loan closing, where the final documents are signed and funds are disbursed.