HUD loan program enables Native homeownership
A map of the United States showing Section 184 home loan approvals in each state as of March 31, 2016, the most recent map the Housing and Urban Development has. In Oklahoma, nearly 15,000 home loans were fully approved. HOUSING AND URBAN DEVELOPMENT
TAHLEQUAH, Okla. – Many Native Americans may qualify for home loans via a U.S. Housing and Urban Development program that’s existed for more than two decades. The Section 184 Indian Home Loan Guarantee Program has flexible underwriting, isn’t credit-score based and is Native-specific.
Congress established it in 1992 to facilitate homeownership in Indian Country, and some of its benefits include low down payments and no private mortgage insurance.
“I just think it’s a great program, and I bought my own house doing this,” Angi Hayes, a loan originator for 1st Tribal Lending in Tahlequah, said. “I just think it’s so wonderful, (a) program that more people should be aware of and definitely the tribes should be aware of.”
She said her office is one branch of a nationwide company specializing in 184 loans.
“Where I work, we’re probably the most experienced nationwide, meaning that we do more (184 loans) than probably any other lender,” Hayes said. “There’s a lot of reasons that it’s probably better than FHA (Federal Housing Administration), USDA (U.S. Department of Agriculture) or conventional loan. A lot of times it’s cheaper up front. For instance, FHA is going to charge you 3.5 percent down. We charge 2.25 percent.”
Hayes said in Oklahoma the maximum loan she can currently offer is $271,050. “The borrower is bringing in that other 2.25 percent, so the $271,050 is not the largest purchase price you can have, it’s just the largest loan amount I can do.”
Hayes said there is also no income limit to the loan.
“That’s probably the biggest misconception with the 184 loan, that usually being involved with your tribe or with status as Native American, they usually tend to be a low or moderate-income situation,” she said. “The beautiful thing about the 184 is that it is not low-income and it is not just for first-time homebuyers.”
Hayes said while HUD doesn’t require a particular credit score to qualify, she needs a credit report to determine an applicant’s debt-to-income ratio. She also needs pay stubs, tax and bank statements and at least two forms of credit with 12 months worth of following.
“I will tell folks I’m not a credit counselor, but because of the way we do our approvals, when I pull credit I’m looking at the meat of the report,” she said. “Basically, you add your income and the debt on your credit report and you add it to the proposed house payment. Those two things together cannot be more than 41 percent of your total gross income. That’s how I determine how much you’re approved for.”
Hayes said for those with past financial or credit issues, the 184 loan could be the best option.
“I’m looking for no late payments in the last 12 months,” she said. “Judgments, you have to be two years out from the time it was filed and paid. We want no collections with balances unless you have proof that you have paid at least 12 months on it. If you want to look at it common sense, what I tell folks is that we don’t want to hold your bad history against you.”
The 184 loan also has a low down payment requirement of 2.25 percent for loans more than $50,000 and 1.25 percent for loans less than $50,000 and charges .25 percent annually for private mortgage insurance. Once the loan value reaches 78 percent, the insurance can be dropped. The buyer also pays a single, 1.5 percent loan fee, which can be paid in cash but is usually added into the loan amount.
Hayes said she’s happy to help build financial plans with applicants depending on their needs.
“If I have somebody walk in, I first want to find out what their goals are,” she said. “If the borrowers want to apply themselves, I’m going to give them the tools that they need to know when they’re ready to purchase. If they just want to do a straight purchase, I highly advise people to get pre-approved before they start looking at property, simply because they may be looking at something that is way over or way under their budget.”
The loan can also be used to refinance an existing home mortgage, Shay Smith, director of the tribe's Small Business Assistance Center, said.
Another attraction is that it can be combined into the tribe’s Mortgage Assistance Program for home purchases. The MAP helps citizens prepare for homeownership with individualized credit coaching and classroom training and provides down payment assistance ranging from $10,000 to $20,000 for first time homebuyers. However, MAP applicants must meet income guidelines, be first-time homebuyers, complete the necessary paperwork and applications and complete the homebuyer’s training classes. How Section 184 Works
The Office of Loan Guarantee within HUD’s Office of Native American Programs guarantees the Section 184 home mortgage loans made to Native borrowers. The loan guarantee assures the lender that its investment will be repaid in full in the event of foreclosure.
The borrower applies for the Section 184 loan with a participating lender, and works with the tribe and Bureau of Indian Affairs if leasing tribal land. The lender then evaluates the necessary loan documentation and submits the loan for approval to HUD’s Office of Loan Guarantee.
The loan is limited to single-family housing (1-4 units), and fixed-rate loans for 30 years of less. Neither adjustable rate mortgages (ARMs) nor commercial buildings are eligible for Section 184 loans. Maximum loan limits vary by county. Eligible Borrowers
• American Indians or Alaska Natives who are citizens of a federally recognized tribe
• Federally recognized Indian tribes
• Tribally designated housing entities
• Indian Housing Authorities
Loans must be made in an eligible area. The program has grown to include eligible areas beyond tribal trust land. Mortgage Assistance Program income guidelines:
Family Size: Maximum Income
1 – $38,080
2 – $43,520
3 – $48,960
4 – $54,400
5 – $58,752
6 – $63,104
7 – $67,456
8 – $71,808