Graphic shows which states are partially, fully or ineligible for Section 184 Indian Home Loans. Graphic by Robert E. Nelson via HUD.gov
Homeownership could be easier to achieve than many Native Americans realize. According to the U.S. Department of Housing and Urban Development, the Section 184 Indian Home Loan Guarantee Program allows borrowers to get into a home with a low down payment and flexible underwriting. Section 184 loans can be used, both on and off Native lands, for new construction, rehabilitation, purchase of an existing home, or refinance. However, according to communication released by Rubenstein Public Relations, Inc., Bank of Oklahoma (BOK) Financial’s public relation firm, mortgage bankers report that Section 184 loans make up a relatively small portion of the loans they process—1% of over 18,000 loan applications.
Homebuyers benefit from Section 184 by paying a lower minimum down payment of 2.25% and a monthly Private Mortgage Insurance (PMI) of just .25%. In comparison, Federal Housing Administration (FHA) loan applicants typically need a minimum down payment of at least 3.5% and PMI can run between .58% to 1.86%, according to an article on BOK Financial’s website.
When considering homeownership, Karen Heston, a senior mortgage banker at Bank of Oklahoma, recommends following these five steps:
1. Check your eligibility. Visit the U.S. Department of Housing and Urban Development’s Section 184 Indian Home Loan Guarantee Program website to see if you live in an eligible area. (The state of Oklahoma is fully approved, but other states such as Texas, are only partially approved).
2. Maintain overall financial wellness. You should be able to show steady employment and that you have remained current on all debts. Pay off any debts that are in collections and don’t take out any new debt.
3. Determine your debt-to-income ratio. Calculate your debt-to-income ratio by dividing the sum of your monthly debt payments by your gross monthly income. Section 184 guidelines require a debt-to-income ratio of no more than 41%.
4. Work with an experienced lender. You should work with a bank that is knowledgeable about Section 184 loans, including the program’s specific financial wellness requirements, to help you determine if you qualify for a Section 184 loan and guide you through the process.
5. Keep trying if you don’t qualify the first time. Don’t get discouraged if you don’t qualify right off the bat. Working on the steps to financial wellness can help you qualify in the future.
Once preapproved for a loan, borrowers can utilize the Osage Nation’s Down Payment Assistance Program. According to the program website, assistance is open to eligible Native Americans living within the State of Oklahoma, and Osage preference does apply. The program is designed to assist first-time homebuyers to find affordable, quality housing. Once approved, the application is good for three months, giving the homebuyer time to search for a home.
Although there are several banks operating as approved Section 184 lenders, Karen Heston at Bank of Oklahoma says their service stands out. They keep and service their own loans and they are 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.