Pros & Cons of Section 184 Loans for Native Home Ownership
For many tribal citizens, the dream of owning a home has been out of reach. Whether it be a house, condo or manufactured home, the road to homeownership can be a long, complicated and tricky process. Besides navigating low income, credit score and a need for financial literacy, the process is hindered by additional factors for Native Americans living on the reservations. Why? Because reservations are trust lands held for a tribe but owned by the U.S. government. But one home mortgage product is specifically designed to help American Indian and Alaska Native families living on tribal lands – the Section 184 Indian Home Loan Guarantee Program started in 1992.
Personally, I would not have qualified for my first home if it weren’t for the Section 184 program. Guaranteed by HUD, it offers Native borrowers more flexibility, including:
- Smaller down payments (1.25% for loans under $50,000; 2.25% for higher loans)
- Reduced mortgage insurance (0.25% if you have less than 22% home equity)
- No minimum credit score, so no impact on lending rate
The Section 184 program has made Native home ownership more accessible, and today 50.8% of Native American families own their homes. Another benefit I didn’t realize is that the Section 184 loan program can be used multiple times for homes on tribal lands.
While these loans can help open the door to home ownership, there are some realities to keep in mind:
- Section 184 is a very niche program, so many lenders and realtors are unfamiliar with it; Native neobanks (online banks) are likely to be more knowledgeable.
- Because low credit scores are accepted, lenders tend to drill down into the debt-to-income ratio and can ask more invasive questions about your financial indebtedness – if you want the loan, you will need to comply.
- The loans are not available in every state including Georgia, Tennessee, and Ohio.
Although a Section 184 loan is more attainable, there is still the reality of maintaining a 15- or 30-year mortgage payment. Prospective buyers and current Native homeowners can benefit from taking a few homebuyer courses online to increase financial literacy and cashflow management.
Whether you choose a Section 184 loan or traditional financing, owning a home as a Native American is a critical step to building generational wealth and setting up your family for long-term financial stability.