The Wide World of Homebuying Assistance for Native Americans

Buying a house is an uphill battle, and if there are ways to give you an edge, you should take it! Native Americans can benefit from a number of special government assistance programs that are specially set up for them. Some of these initiatives can help when it comes to buying a house, including the part that includes coming up with the down payment.

Jennifer Wilson, a real estate agent in Albuquerque who sells homes more than 44% quicker than the average agent in her area, says she works with about one buyer each year who uses a Native American-targeted government-sponsored loan program. Specifically, her clients go through the U.S. Department of Housing and Urban Development’s Section 184 loan program.

Wilson is happy to clue her eligible clients in on Section 184 initiative. One reason she likes it is because the mortgage insurance premium is lower than for both conventional and FHA loans. “And of course, it’s a much lower down payment,” she adds. “It’s 2.25% versus 3% for conventional or 3.5% for FHA.”

If you think you might potentially be able to take advantage of one of these Native American down payment assistance programs, it is also helpful to know how to apply. Here’s a guide to where to start looking and what you need to know.

Are you registered with a tribe?

Housing assistance programs tailored for Native Americans are — naturally — generally limited to homebuyers who can show that they are members of a recognized Native American tribe. If you are already a registered member of one of the 574 recognized tribes, you should be good to go. But if not, here’s how to get your paperwork in order.

The process starts with researching your genealogy. This will help you identify the specific tribe to which your ancestor belonged. You can use a computer and internet connection to do this research. Your local public library can probably help. The National Indian Law Library has a guide for how to get started tracing your family history, including a list of tribal genealogy resources.

While doing this, you’ll need to acquire and hang onto documents that support your claim to being a Native American.

There’s no universal standard for documentation. Each tribe has its own rules and procedures for granting membership. However, generally speaking, the paperwork has to prove that you descended from an ancestor who belonged to the federally recognized tribe to which you are petitioning for membership.

When you’ve identified the specific tribe you think you belong to, you can contact the tribe to find out the requirements for registering as a member. The Tribal Leaders Directory is an online resource maintained by the Department of the Interior’s Bureau of Indian Affairs. You can search the directory by state or view a map of tribal leaders to help you contact the appropriate tribe.

Do you live on or near a reservation?

If you live on a reservation, it’s a good idea to check with your local tribal office about down payment assistance. The officials there will probably be excellent sources of information about any local programs that may be able to provide down payment assistance.

You need informed local experts because there are so many different down payment assistance programs. There are — literally — thousands of these programs nationwide. They operate in every state and major city, as well as in most smaller cities and towns.

Often down payment help is only available to residents of a specific location. For instance, this program provides grants of up to $10,000 that can be used for down payment and other costs, but only if the Native American buyer uses a lender based in Oneonta, Minnesota.

And the rules change from time to time, which is another reason to look for local informed assistance. For example, Wilson says that until a few years ago, Native American loan applicants had to live on reservations. But today, in New Mexico and Arizona, all of the state is considered tribal land, opening up more opportunities for Native American buyers.

The change had a significant impact on who can take advantage of these programs, Wilson says. “It’s important because it can be used anywhere, not just on tribal land,” she explains.

Down payment assistance money often comes in the form of a grant that doesn’t have to be repaid. Other times it may comprise a loan that has to be repaid. And sometimes the loan can be forgiven if the buyer occupies the home for a certain number of years.

Just like the different tribes with their varying membership requirements, each down payment assistance program is different. Many are limited to first-time homebuyers or buyers with limited incomes. Others may target specific groups, such as teachers, firefighters and, in some cases, Native American homebuyers. The best way to identify these hyper-local highly specialized down payment assistance initiatives is to check with the local tribal office.

Many Tribally Designated Housing Entities (TDHEs) have a variety of ways of helping Native American home buyers afford homeownership. The assistance may take the form of special financing calling for a low down payment or no down payment at all. You can find a local TDHE using the online directory provided by the Department of Housing and Urban Development (HUD).

Are you a veteran, or married to one?

Military service veterans represent another group of people eligible for special homebuying assistance. And, if you are both a veteran and Native American — or you are a veteran and married to a member of a registered tribe — the Department of Veterans Affairs (VA) has a homebuying finance offering just for you.

The VA’s Native American Direct Loan program offers loans backed by the government. The loans can be used to purchase, improve, or build a home that is located on federal trust land. Trust land is land that the federal government holds the title to, but a tribe owns the beneficial interest in the land.

Rather than providing buyers with money to put down, like a down payment assistance program, the Native American Direct Loan Program provides zero-down financing. This allows buyers to acquire a home without putting any money down.

A VA Native American loan can also give you additional benefits, like a low interest rate —  2.75% in January 2022 — and caps on closing costs. Plus, there’s no need for potentially costly mortgage insurance.

Can you use a Section 184 Indian Home Loan Guarantee?

The Section 184 Indian Home Loan Guarantee Program is one of the best-known sources for assistance to Native American homebuyers. If you qualify, you can buy a home with as little as a 1.25% down payment — less than half the down payment for a typical FHA home loan.

However, there are some stipulations. For instance, the 1.25% down payment option is only available for homes selling for less than $50,000. If the home costs more, the down payment goes up to 2.25%.

Beyond these special details, Wilson says that homebuyers thinking about using a Section 184 loan guarantee should expect to have to conform to the home lending industry’s standard qualifying criteria.

“It’s pretty much like any other loan,” she says. “They look at your income, credit, and debt.”

That said, there’s no minimum credit score for this loan, though you must be deemed “creditworthy.” Another perk is that your rate will be based on market rates, not your credit score.

While these clients are not a huge part of her business, Wilson sees the availability of low down payments and down payment assistance programs as a huge plus for her homebuying clients.

“It’s important because they have to have less money saved to get them into a home,” Wilson says. “It makes it so they can afford a home sooner rather than later.”

Do you live in an area with a local bank program?

In many areas of the country, there are local bank programs that offer down payment assistance to Native American buyers. A good example is the aforementioned program for buyers in Oneonta, Minnesota.

The Federal Home Loan Bank of Des Moines (FHLBDM) is a big player on many of these initiatives, which take a variety of paths to provide help to homebuyers. These include:

• Affordable Housing Program (AHP). The AHP offers grants to organizations such as tribes, tribal housing authorities, and non-profit organizations. AHP grant money is not delivered directly to individual homebuyers. Rather, the organizations that receive the grants use the money to build affordable housing. People looking for housing can find a list of the organizations that received AHP grant money for the current year in an AHP recipient report available on the FHLBDM website.
• Home$tart. This FHLBDM program provides up to $7,500 for down payment and closing costs. Funds target low- and moderate-income households. You can apply at the Home$tart website.
• Native American Homeownership Initiative (NAHI). The NAHI provides up to $15,000 funds directly to eligible individual first-time homebuyers. The money can be used for down payments as well as covering closing costs. You can learn more and apply at the NAHI page on the FHLBDM website.

One significant caveat is that not all these programs have funds currently available to applicants. For instance, as of October 12, 2021, the NAHI was out of money. That didn’t mean there was no point in looking into the program, however — more funds can be allocated in the future. In this case, on January 4, 2022, when FHLB Des Moines added $100,000 in NAHI funds.

Also, other programs may have funds available. For instance, as of October 1, 2021, another $1.75 million became available for buyers using Home$tart. Additionally, sometimes reservations for funds are withdrawn, making it possible for NAHI to accept new reservations.

Eligible borrowers are best advised not to delay when making their applications. Funds for these programs are generally available on a first-come, first-served basis. And loans can be approved only as long as the money lasts — at least until the next round of funding comes through.

What about a different government financing program?

While Native American homebuyers have some appealing options for using down payment assistance, some buyers might also want to use a more mainstream method of financing a home. For instance, with a loan backed by the Federal Housing Administration, buyers can put down as little as 3.5%. For a home costing $100,000, that means the down payment would be only $3,500.

These loans are available to anyone who qualifies, whether or not they have documented Native American ancestry with a recognized tribe.

An even more appealing option could be a zero-down loan from the U.S. Department of Agriculture (USDA). No-down payment USDA loans are available for homes in qualifying rural areas. Because the USDA loans target lower-to-median income individuals, buyers are also subject to income limits. And, like FHA loans, there’s no requirement to be a member of a federally registered tribe.

Finally, in addition to these government-backed programs, conventional private lenders also offer low-down payment options that are open to anyone, Native American or not. If you are a first-time buyer within the eligible income limits, you may qualify for a conventional mortgage with just 3% down. Other buyers can get into a home with as little as 5% down.

As with just about every aspect of buying a home, having an experienced and qualified real estate agent in your corner can greatly increase your chances of success. There may be local programs that can help that are unknown outside your region. For any Native American looking to buy a home, identifying and working with an agent who has experience with appropriate down payment assistance programs can be a huge help. As Willson puts it, “If the lender doesn’t know about it and the agent doesn’t know about it, that may not be helpful.”

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