Native American homeownership program: what you need to know

A federal loan program that helps Native Americans buy, renovate or refinance a home aims to increase borrower protections and increase lenders’ participation.

“The Section 184 program has nuances that are best interpreted through a lender that is familiar with the program and committed to serving Native American tribes," said Tanya Bates, regional manager for BOK Financial Mortgage®. BOK Financial® has one of the largest Native American-focused banking programs in the country, with more than 60 tribal relationships across 15 states.

Helping to make home ownership more affordable—in any environment
Congress established the Section 184 program in 1992 to make homeownership easier for Native Americans and to increase the communities' access to capital, according to the U.S. Department of Housing and Urban Development (HUD). Loans through the program require a low minimum down payment—2.25%, or as low as 1.25% for loans less than $50,000—and a one-time Upfront Loan Guarantee Fee of only 1% that is paid at closing and can be financed into the loan.

“This all helps the borrower have an overall lower payment with limited amount of money out of pocket,” said Karen Heston, senior mortgage banker with BOK Financial Mortgage in Oklahoma.

Section 184 loans are available regardless of current mortgage rates and serve as a reminder that focusing on rates alone can mean overlooking other home buying tools that can significantly impact your monthly payment, experts said.

"Borrowers are definitely asking about rates, but what's more important than ever is that we match borrowers with the right program for them," explained Heather Drummond, regional director of home loans for BOK Financial.

"We have to understand where you—the borrower—want to be as far as payment is concerned and how much you have to put down," she continued. "That's why it's very important to discuss these questions upfront."

Learn what programs you qualify for
Oftentimes, Section 184 loans are more beneficial than conventional home loans for qualified borrowers. For instance, unlike first-time home buyer products, there is no income limit for a Section 184 loan, noted Elvira M-Duran, a mortgage banker with Bank of Albuquerque Mortgage.

And yet, some borrowers who would qualify either don't know the program exists or hold misconceptions about it.

For example, one common misconception is that they can only be used on tribal trust land, which is no longer the case, Duran said. The program has expanded to be accessible on or off reservation land, with some limitations.

In some states, such as Texas, only some counties are eligible. In other states—such as Oklahoma, Arizona and Colorado—all counties are eligible. A full list of approved lending areas is available on the HUD website. To qualify, you must be an American Indian or Alaska Native who is a member of a federally recognized tribe.

Another common misconception is that Section 184 loans can only be used to buy a home. "This product is not just for purchasing," Duran clarified. "Existing homeowners can also refinance for debt consolidation, remodeling, getting cash back or lowering their rate."

Questions for your banker
Even if you're confident you qualify for a Section 184 loan, your loan officer can help clear up any confusion on the following topics:

• Does the loan have to be sent out for governmental approval? BOK Financial is one of only a few lenders able to accelerate the process by approving Section 184 loans on behalf of HUD, rather than sending paperwork to HUD for approval. "I am with my borrowers before, during and even after the closing," Heston said.
• How experienced are you with Section 184 loans? For more than 25 years, BOK Financial has had specialized Native American home loan officers who are experienced with the unique Section 184 loan requirements and approval process.
• Can the loan be used with other assistance programs? Help is sometimes available from tribes and states that offer down payment assistance. In these cases, the assistance can often be used in conjunction with the Section 184 program.
• Is a Section 184 loan the right product for me? Although Section 184 loans are often the best option for qualified borrowers, there are some cases—such as when a person has a high credit score and low income—where a conventional loan may be a better fit, Drummond said.
• Does my co-borrower have to be Native, too? No. Even if your co-borrower is not Native, their income will still apply.

"We want to be sure our clients and local Native communities are aware of these opportunities, especially if it means getting someone into their first home," Drummond said.