What Is a 184 Loan?

The United States Department of Housing and Urban Development (HUD) offers a number of assistance programs for home mortgages. These programs are designed to help people who face varying types of challenges when attempting to purchase a home. Section 184 is a HUD program created to offer special mortgage loan assistance to members of certain Native American/American Indian and Alaskan tribes. Formally called the Indian Home Loan Guarantee program, loans generated under this program are generally referred to as a “184 Loan.”

Why Were Section 184 Loans Created?

Section 184 was created by the Housing and Community Development Act of 1992 to address the lack of mortgages for native people. American Indians and members of Alaskan tribes deal with unique challenges that make homeownership difficult. For example, the land itself that Native people live on can present a challenge, as much of that land is held in a trust — either a tribal trust or allotted (individual) trust. By law, lands held in trust for a tribe cannot be mortgaged.

Land held in a tribal trust must be designated as a “leasehold estate,” and then approved as such by the Bureau of Indian Affairs (BIA) and HUD. Even with individual land, which doesn’t have to get approval for a leasehold estate, a mortgage loan application on that land has to be approved by BIA and HUD. These issues can make for a complicated, challenging path to homeownership for Native people who wish to own a home.

The Indian Home Loan Guarantee program was developed specifically to help provide private funding through Section 184 loans — mortgages with favorable terms that are exclusively for members of particular tribes across the country, including American Indian and Alaskan Native families, members of certain Alaska Villages, Tribes, or Tribally Designated Housing Entities. Through this program, the government aims to strengthen the value and financial wellbeing of Native assets and Native communities.

Benefits of a Section 184 Loan

Section 184 Loans offer several benefits over many other traditional types of mortgage loans. Qualified recipients can apply for a Section 184 loan only by working with participating lending institutions, such as Financial Concepts Mortgage. They in turn work with the Bureau of Indian Affairs on addressing the complexities of leased tribal land, aiming to make the process smoother and easier. Once the land issues are addressed, the lender submits the loan for approval to HUD.

The benefits of a 184 Loan are many, and can include:

• Low down payment
• Low interest rates
• Included loan guarantee fee
• Manual underwriting — meaning a custom, detailed review process rather than submitting documents to a computer that automatically generates approvals or denials based strictly on numbers
• Lenders who are trained and educated in the types of challenges Native people face when they want to become homeowners
• Protection against predatory lenders that might take advantage of these borrowers

Another benefit of Section 184 loans is that their purpose isn’t restricted solely to buying a new home. Of course, these loans can be used to purchase an existing home, but they can also be used to build a new home, or for the rehabilitation of a new or existing home. They can even be used to refinance an existing mortgage under more favorable lending terms.

Qualifications for a HUD 184 Loan

Eligibility for a 184 loan requires recipients to be members of certain federally recognized tribes. Not all tribes participate in the 184 loan program, and there are certain qualifications that have to be met to get one of these loans. But the first factor for qualification is belonging to an eligible and participating tribe.

Understanding eligibility can be complicated, and if you are unsure if you qualify, a lender who participates in providing Section 184 loans can help you understand whether or not you are eligible and explain the particulars of the program to you. For example, experienced lenders know that the program does include some areas of land that are not part of tribal trusts. Further, there are some states where land in every county is eligible, other states where land in only certain counties are eligible, and other states where there is no eligible land at all. This is why working with a lender who has experience with Section 184 mortgage loans is important.

If you are part of an eligible tribe and the house you want to buy, build, or finance for rehabilitation is on eligible land, that’s a good first step. But there are a few other factors to consider before applying for this or any other type of mortgage:

• Do you have a steady source of income?
• Can you afford your portion of the down payment? (usually 2.25%)
• Can you afford closing costs?
• How is your debt-to-income ratio?
• Is your credit score good, and is your credit report current and accurate?

The Tribal Leaders Handbook on Homeownership may also be a helpful resource for those considering a 184 Loan. This document includes important resources, background, and information, including what types of loans may be available for Native people.