Unlocking Homeownership: Essential Mortgage Programs For Native American Home Buyers

Homeownership can be challenging for many, but for Native Americans, the obstacles to owning a home have historically been profound and unique.

The data highlights this disparity. In 2023, only 51.6% of Native Americans or Alaskan Natives owned their homes, down from 53.4% in 2022 and 55.1% in 2021, according to the U.S. Census Bureau. This is one of the lowest homeownership rates among all ethnic groups in the U.S.

Generations of systemic barriers, including cruel and exclusionary federal policies, limited access to financial resources, high poverty rates, scarce employment opportunities and scant infrastructure (especially in rural tribal areas) have compounded the difficulties for Native Americans seeking homeownership that still exist today.

Fortunately, there are promising pathways available for Native Americans to achieve homeownership. There are dedicated mortgage loan programs, grants, educational resources and, more recently, expanded counseling support through the U.S. Department of Housing and Urban Development’s (HUD) Office of Housing Counseling to better serve the unique needs of tribal communities.

Moreover, Federal Home Loan Banks (FHLB)—a network of 11 privately capitalized regional banks partnering with banks, credit unions and other lending institution members to provide affordable real estate financing—are also actively expanding their loan programs and home financing partnerships to increase homeownership access to tribal communities.

Exploring Mortgage Programs for Native Americans

The legal structures surrounding Native American land ownership are complex.

In general, most Native American land is federally held trust land. The U.S. holds more than 56 million acres in trust to benefit various tribes and their members.

Among the many federal programs and services that trust lands offer tribes and individual members are enhanced housing opportunities. These opportunities include several prominent mortgage programs to support home buyers who are members of one of the 574 federally recognized Native American tribes or Alaskan Native entities.

Below is an overview of these loan types, which provide access to affordable financing to help borrowers purchase, renovate, construct and potentially refinance a home on native lands.

HUD Section 184 Indian Home Loan Guarantee Program

Established in 1992 through the Housing and Community Development Act, the Section 184 Loan Guarantee Program was designed to address the shortage of mortgage lending in Native American communities.

These 100% HUD-guaranteed loans incentivize national and local lenders to offer mortgages to Native Americans. HUD’s Office of Loan Guarantee, within the Office of Native American Programs, works with a nationwide network of banks to expand Native Americans’ access to home financing.

Karen Heston, a mortgage banker at BOK Financial, a financial services company that markets itself as having one of the nation’s largest Native American-focused banking programs with tribal relationships across 15 states, says she has successfully originated numerous Section 184 loans.

“Based on personal experience, I feel that more Native Americans are purchasing homes using Section 184 loans as they have become more aware of it,“ Heston tells Forbes Advisor.

Oklahoma has the second-largest Native American population in the U.S., highlighting the essential role of Section 184 loans in facilitating homeownership in areas with high Native American populations.

Heston explains that the program is not tribe-specific but that the property must be in an eligible area. Currently, Section 184 is authorized in 38 states.

Here are the primary requirements and features of this loan program:

Native Americans who qualify can use the Section 184 loan to purchase an existing home, renovate a home, purchase and renovate a home, construct a new home or refinance. Once borrowers are ready to proceed, they can find an approved lender on HUD’s Section 184 participating lenders list.

HUD Section 184A Native Hawaiian Housing Loan Guarantee Program

This loan program is similar to the Section 184 Loan Program with the same eligibility requirements. However, it focuses on expanding homeownership opportunities specifically for Native Hawaiians, allowing them to build, purchase, or renovate properties on Native Hawaiian homelands.

Eligible borrowers can apply with an approved 184A lender to purchase or rehabilitate an existing home. Section 184A loans are guaranteed 100% by HUD, protecting lenders if a borrower defaults.

Native American Direct Loan (NADL) Program

Administered by the U.S. Department of Veterans Affairs (VA), the Native American Direct Loan (NADL) program provides financing options for eligible veterans who are Native American or have a Native American spouse.

The program is designed to assist eligible borrowers in securing financing to buy, build or rehabilitate a home on federal trust land. It also offers refinancing options to help lower mortgage interest rates.

Here are the loan’s features and eligibility requirements:

If you’re eligible for a COE but don’t yet have one, you can apply online through the VA website. To start your loan application or learn more, NADL coordinators are available by email or phone Monday through Friday, from 8 a.m. to 6 p.m. ET, to help guide you through the process.

USDA Rural Development Section 502 Direct Loan Program

For hopeful homeowners living in eligible rural tribal communities, the USDA Rural Development’s Single Family Housing Direct Home Loan, or Section 502 Direct Loan Program, may be a good option.

This program supports low- to very-low-income residents in USDA-approved rural areas to afford safe and decent housing by providing temporary payment assistance.

Here’s a look at the eligibility criteria and key features of the Section 502 Direct Loan program:

Prospective borrowers can check their eligibility by visiting the USDA’s Income and Property Eligibility website or contacting a USDA program representative for additional information.

Freddie Mac HeritageOne

Freddie Mac offers a unique mortgage product to eligible Native Americans looking to buy a home in tribal areas.

To qualify, borrowers must be members of federally recognized tribes that have established a memorandum of understanding (MOU) with Freddie Mac or are currently participating in HUD’s current Section 184 program.

Here’s a summary of the features and requirements:

Resources and Tips for Native American Home Buyers

Heston notes that, like other buyers, Native Americans entering the housing market are likely to encounter intense competition, especially amid tight inventory and limited affordable options.

To address affordability challenges, researching housing assistance programs could be time well spent. While there are down payment programs in all 50 states open to everyone who qualifies, several states specifically offer programs designed to support Native American homeownership by assisting with down payments and other housing costs.

It’s also worthwhile to consult with local banks and lenders, as they may have unique grant programs tailored for Native American borrowers.

To streamline the home-buying process, speak with a lender sooner rather than later.