How the FHA Section 184 Indian Home Loan Works

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How the FHA Section 184 Indian Home Loan Works

When Native Americans in California look to purchase a home, they face several unique challenges. The most common of these problems is an inability to acquire a mortgage for a home built on reservations or tribal land. The FHA 184 Indian Home Loan was established to address this problem and increase access to mortgages and home loans for Native American buyers.

Why Have Native Populations Been Underserved?

A large portion of land in Native American areas is held in trust by the U.S. government, which means the land cannot be mortgaged. This land is protected and is intended to be perpetually available to Native American tribes and individuals. The unique status of Native American lands means that lenders could not seize property or that land as part of a foreclosure action. This has made lenders unwilling to support the purchase of homes on tribal reservations. The FHA 184 Indian Home Loan program is designed to relieve these restrictions.

The FHA 184 Indian Home Loan

The FHA 184 Indian Home Loan program is a home mortgage program designed specifically for the needs of American Indian and Alaska Native families, Alaska villages, tribes, or tribally designated housing entities. The mortgage loans made under this program are 100 percent guaranteed by the Office of Loan Guarantee within the Office of Native American Programs of the U.S. Department of Housing and Urban Development (HUD). They offer multiple benefits to borrowers, such as a lower down payment and lower interest rates, and may be less restrictive than comparable FHA loans.

How the FHA 184 Indian Home Loan Works

The FHA 184 Indian Home Loan program is intended to expand residential ownership opportunities by Native Americans while also ensuring that Native lands remain intact.

When a potential purchaser is seeking a loan to build a home on tribal trust land, the buyer collaborates with HUD and the Bureau of Indian Affairs (BIA) to establish the home as a leasehold estate. This converts the property into a leased entity for the term of the mortgage plus 10 years. The BIA and HUD must approve this action. If a home loan in this situation goes into default, the lender can seize only the lease itself and not the land or home.

A home on allotted trust land does not require conversion to a leasehold estate. However, BIA and HUD must still approve the loan applicant. If the lease and asset are subject to liquidation, the lender must first offer to transfer the loan to an eligible member of the tribe, to the tribe itself, or to the Indian Housing Authority. If a foreclosure occurs, the lender cannot sell the land to anyone other than an eligible tribe member, the tribe itself, or the Indian Housing Authority.

Who Qualifies for a FHA 184 Indian Home Loan?

FHA 184 Indian Home loans are available to those who are currently enrolled as a member of a Federally Recognized Tribe, either Native American or Alaskan. Verification of tribal enrollment will usually be required.

Loan experts at Übermortage can assist you with the qualification process and answer any questions about other necessary qualifications, such as credit scores, income guidelines, or down payment requirements.

Benefits of the FHA 184 Indian Home Loan

Borrowers who qualify for a FHA 184 Loan will receive a number of benefits under the program.

  • Low-interest rates: Interest rates on FHA 184 loans are based on market rates, not the borrower’s credit score.
  • Low down payments: Typically, down payments are 2.25 percent on loans over $50,000 and 1.25 percent on loans under $50,000.
  • Manual underwriting: The loan program depends on manual underwriting that ensures all circumstances are covered in the loan process. Automated tools that could reject candidates without explanation are not used.
  • Protections from predatory lending: The program prevents FHA 184 loans from being used for Adjustable Rate Mortgages (ARMs). Further, the program constantly monitors the fees and costs lenders charge to Native American borrowers, ensuring that these costs remain fair and reasonable.

Uses of the FHA 184 Indian Home Loan

FHA 184 loans may have fewer usage restrictions than, for example, other types of FHA loans. Your Übermortage can give you full details. In most cases, a qualified borrower can use a FHA 184 Indian Home Loan for:

  • Purchasing an existing home.
  • Construction of a new home, including homes built on site or manufactured homes on permanent foundations.
  • Renovating an existing home.
  • Purchasing and renovating a home.
  • Refinancing a home.

FHA 184 loans are applicable only to single-family homes (1-4 units). They can only be applied to homes that are used as the borrower's primary place of residence, not for second homes, vacation homes, or investment properties.

A program of homebuyer education is also required for borrowers under this FHA 184.

Übermortage specializes in providing Californians with expert advice on FHA loans and other mortgage assistance designed to help them become homeowners. Contact us today for more information on the FHA 184 Indian Home Loan to see if you qualify. Übermortage can guide you through the qualification and application process, helping to make your home ownership a reality.


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