The Native American home loan market is underserved.
There are two types of home loan programs for Native Americans that are guaranteed by the government.
This article will take an in-depth look at these Native American home loans, the requirements, and who is eligible.
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Native American Direct Loans
Native American veterans can build, rehab, or buy a home located on Federal trust land using all of the benefits of VA loans. They don’t require a downpayment. There is no minimum credit requirement for VA loans to be guaranteed by Veterans Affairs, lenders will set their own credit requirements, and most lenders require a 580-620 credit score.
If you are Native American and do not want to buy a home of Federal trust land you can use the VA home loan program.
Changes to the VA Direct Loan Program make them easier to get by eliminating the VA loan limits and expanding who qualifies to have the VA funding fee waived.
- Funding Fee Changes – Veterans and active duty service members will see an increase in the VA funding fee from 0.15% to 0.30% of the loan amount. The funding fee is decreased slightly for National guard and reserve members.
- Purple Heart – Active-duty servicemembers who’ve earned a Purple Heart can have 100% of the funding fee waived.
- Loan Limits – Veterans in high-cost markets no longer need to get a jumbo loan if the loan amount exceeds the conforming loan limits. The maximum loan amount you qualify for is determined by your debt-to-income ratio.
- Native American Direct Loans – The previous loan limit for NADL loans was $ 80,000. The new law lets mortgage lenders offer loan amounts up to the conforming loan limits in their county.
2020 Conforming Loan Limits | ||
# of units | Low-cost area limit | High-cost area limit |
$ 1,184,925 | ||
$ 1,472,550 | ||
NADL Loan Requirements
- Only available if you intend to use the home as your primary residence
- The home appraisal must be equal to the loan amount or higher
- A maximum debt-to-income ratio of 50%
- Minimum credit score requirements of 580-620
- Applicant must be an eligible Veteran with a VA Certificate of Eligibility
- The loan must be to purchase, construct, or improve a home on Native American trust land
- Proof of income for the last two years
Who is Eligible
- Native American veterans, OR
- Non-Native American veterans married to a Native American spouse, OR
- Reserve and active-duty National Guard members, OR
- Active-duty servicemembers, OR
- Reserve and Guard members after 6 years of service
How do I apply for a Native American Direct Loan?
- Apply for a VA Certificate of Eligibility (COE) – The certificate of eligibility (COE) confirms that you meet the requirements for VA benefits. Get your COE here.
- Contact the regional VA loan center for your state – Find your state’s VA regional loan center
NADL Program Benefits
- 100% financing (no down payment) – As with VA loans NADL loans allow up to 100% financing of the purchase price.
- No mortgage insurance – Mortgage insurance premiums are not required
- Low fixed-rates – Fixed-rate 30-year mortgage loans are available
- Borrow up to the conforming loan limit – 80k loan limit lifted in 2020
- Use the benefit multiple times – The NADL program can be used multiple times, it does not expire.
- No prepayment penalties – Pay off the balance of the loan at any time without a penalty
- Low funding fees – Funding fees are low
- Funded fee waived for certain veterans – Purple Heart recipients, surviving spouses, and veterans who have a service-connected disability
- Low interest rates – Interest rates on NADL loans is usually lower than a conventional loan
VA Loan Funding Fees
As with VA loans, the Native American Direct Loan Program does have a VA funding fee. However, some veterans may be eligible to have this fee waived.
- Had a service-connected disability and receive compensation from the VA
- Surviving spouses of veterans who died during service
- Received a Purple Heart during active-duty
Section 184 Loan Guarantee Program
Section 184 loans were created to provide guaranteed home loans to Native Americans and Alaskan Native tribal members who want to purchase an existing home, build a home, or buy a home that needs repairs. Section 184 loans are guaranteed by the Office of Loan Guarantee in HUD’s Office of Native American Programs and offered by private lenders. They offer financing to eligible borrowers, require 2.5% down for loan amounts above $ 50,000, and require a 1.5% guarantee fee that can be rolled into the loan.
Section 184 Loan Requirements
- Down payment requirement of 2.25% for loans over $ 50,000
- Down payment requirement of 1.25% for loans under $ 50,000
- Minimum credit requirement varies by lender
- Collections must be paid in full before closing
- For primary residence only
- Only available for single-family homes
- Loan limits are the same as FHA loan limits
- The program is not available in Delaware, Georgia, Washington D.C., Kentucky, Hawaii, Maryland, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Vermont, and West Virginia.
Who is Eligible
- Alaska Natives and American Indians who are enrolled members of a federally recognized Tribe
- Tribally Designated Housing Entity (TDHE)
- Regional Corporations, Indian Tribes, or Alaska Village
- An Indian Housing Authority (IHA)
How to apply for a Section 184 Loan?
- See if your Tribe participates in the Section 184 Program – Section 184 Participating Tribes List
- Contact a lender from the Section 184 Participating Lenders List
- Low down payment – Just a 2.25% down payment is needed for home loans above $ 50,000, 1.25% down needed for loans under $ 50,000
- No mortgage insurance – Low mortgage insurance premiums
- Low fixed-rates – Fixed-rate 30-year mortgage loans are available
- Borrow up to the FHA loan limit – Section 184 loan limits are the same as FHA loans
- Use the benefit multiple times – You can use the Section 184 program multiple times
- No prepayment penalties – Pay off the balance of the loan at any time without a penalty
- Low guarantee fees – Guarantee fees are low 1.5% and can be rolled into the loan
- Low interest rates – Section 184 interest rates on loans are lower than conventional loans
- The program is not available in Delaware, Washington D.C., Georgia, Hawaii, Kentucky, Maryland, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Vermont, and West Virginia.
