Taking out a mortgage can be stressful when trying to figure out the different loans and what is right for you. There are so many different lenders and programs including the FHA (Federal Housing Administration) and conventional lenders such as mortgage companies and banks. But, there is a third choice for those who qualify. Here are some reasons why choosing the HUD 184 over a bank loan is a good idea for Native Americans who are thinking about taking out a home loan:
Program for Native Americans
Why choose HUD 184 over a bank loan? Because, HUD 184 was specifically established for Native Americans and Alaskan native individuals, families, and tribes to be able to offer home ownership and housing renovation. Established in 1992, the Indian Housing Loan Guarantee Program has made it easier for Native Americans to obtain home loans. As of 2014, the Section 184 program is available in 37 states and has done over 15,000 loans which is approximately $2.5 billion dollars in guaranteed mortgages to individuals and tribes.
Although HUD Section 184 has some basic criteria that must be met in order to take out a loan from the program, it has generous allowances and is actually easier to get than a conventional loan. Obtaining loans through other banks and mortgage lenders is difficult because it is based on software-driven parameters that if you don’t fit in their predetermined potential borrower, you don’t qualify. With the HUD 184 loans, each application is considered on a case-by-case basis and is personally underwritten by a Home Loan Program representative. The program also has allowances for lack of credit history, past credit problems, and other circumstances that don’t fit typical bank and mortgage lender criteria.
Growing Network of Lenders
Before the HUD Section 184 program began, there was very little mortgage lending on Native American Reservations. That is because the land is held in trust for the tribe and members. This led to many Natives not being able to participate in the American dream of home ownership. After Section 184 was created, it became easier for Native Americans to take out a mortgage because it is the home and the lease that are mortgaged, not the land itself. This made mortgage companies and banks more willing to work with Natives on creating lending plans. In addition, the program has been expanded to include lending in many areas outside of tribal reservations. As of 2013, there are approximately 130 lenders that have been approved for Section 184. To see a list of all the companies and banks that are approved under HUD 184, visit here.
No Mortgage Insurance
Normally, mortgage insurance is a policy that compensates lenders or investors for their losses due to the default of a mortgage loan. Typically, these are required on normal loans when the down payments are below 20%. Although HUD’s 184 down payment is much less that 20%, it does not require mortgage insurance. Not having to pay monthly mortgage insurance can significantly reduce the amount of money you have to pay yearly, which could add up to several hundreds of dollars per year.
Why HUD 184 Over a Bank Loan? The Abundant Features
There are many great features of the HUD Section 184 program that make it better than other loan programs. Families can put the money from the loan towards multiple options such as refinancing, purchasing/renovating an existing home, or constructing a new home. Also, just as it is mentioned above, there is no mortgage insurance and also a low down payment.
If you have questions about HUD Section 184 or need any clarification on what was covered in this post, feel free to leave a comment or contact 1st Tribal Lending with your question privately.