3 Ways Indigenous Americans Can Get a Mortgage for a Home on a Reservation

Getting a mortgage to buy a home on a reservation is notoriously complex.

Because the Department of the Interior holds legal titles for a large percentage of tribal lands, members of these tribes can't use federal land as collateral to secure a conventional mortgage. More often than not, banks and non-tribal lenders will find the transaction too risky, as they can't foreclose on land that's held in trust by the federal government.

But tribes have been fighting back, and several Native-owned banks and credit unions are working hard to make homeownership available across tribal lands. To be clear, there is much progress to be made, and many reservations still have fewer options than other home buyers. But if you're wondering how to secure financing for a house on your reservation, here are three options to consider.

1. Native-American-owned banks

Native-American-owned banks are perhaps the best way to get financing for a mortgage. These banks are led by Indigenous Americans, and, as such, employ professionals who understand the complex rules that govern tribal land properties.

These banks might provide some of the mortgage options listed below -- Section 184 loan or Native American Direct Loan -- or they might provide other financing options.

Native-owned banks have the smallest presence of minority-owned institutions in the U.S. In fact, according to the banking analytics company Might Deposits, only 18 have a majority of their voting stock (51% or more) under Native ownership:

But this list isn't exhaustive, and there are other financial institutions that provide services to Native American clients. For a more exhaustive list, you can look at the Federal Reserve Bank of Minneapolis' map of Native American Financial Institutions, which might help you find an institution closer to you. You can also look at the National Credit Union Administration's list of Minority Depository Institutions for Native-American-led credit unions.

2. Section 184 loan

If you don't have a Native-owned bank near you, you can also apply for a Section 184 mortgage through the U.S. Department of Housing and Urban Development (HUD).

These loans can be used on most types of single-family homes, including new constructions, existing houses, and rehabilitations. To qualify, you have to be part of a federally recognized tribe, and the home you're looking to buy must be within an approved state or area. Most states have full or partial approval, with only 11 having no approval at all (Delaware, Georgia, Kentucky, Maryland, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Vermont, and West Virginia).

If you don't have a credit score, that's okay: your lender will manually underwrite the loan to see if you're creditworthy. You will need to put down 2.25% for loans above $50,000 or 1.25% for mortgages below that amount. And when you're approved, you'll pay 1.5% of the loan as a one-time fee.

Keep in mind that only HUD lenders can issue these loans, which will limit your choice of bank. You can look at HUD's website for a full list of lenders, as well as a map of areas that are eligible for these loans.

3. Native American Direct Loan

If you or your spouse served in the U.S. armed forces, then you might qualify for a Native American Direct Loan. These loans are issued by the Department of Veterans Affairs (VA) and are given out to Indigenous Americans who meet one or more of the following:

• You served 90 continuous days during wartime.
• You served 181 continuous days during peacetime.
• You completed six years in the National Guards or Reserves.
• You're the surviving spouse of a service member who died in the line of duty or from service-related disability.

Check in with locals for more information

If you live on a reservation, check with your local tribal office for information about local mortgage lenders, down payment assistance, and grants to cover closing costs. Your tribal office may also have more information on current mortgage rates, as well as what you might need in order to apply for financing.