October 11, 2017
Is there an FHA loan for homes on tribal land? According to the FHA loan handbook, HUD 4000.1, a type of loan known as a “Section 248 Mortgage” is available specifically for home purchases of this type.
HUD 4000.1 defines the Section 248 mortgage as “a purchase or refinance Mortgage covering one- to four-family dwellings on Indian Lands.” Since definitions are extremely important for many aspects of the FHA loan program, this section of the FHA loan rules also defines what the FHA considers to be “Indian land” and the communities that live there:
“Indian Land refers to those lands that are held by or for the benefit of Indian Tribes under some restriction or with some attribute peculiar to the legal status of its owners. Indian Tribe refers to any Indian or Alaskan native tribe, band, nation, or other organized group or community of Indians or Alaskan natives recognized as eligible for the services provided to Indians or Alaskan natives by the Secretary of Interior because of its status as such an Entity, or that was an eligible recipient under Chapter 67 of title 31, United States Code, prior to the repeal of this section.”
Eligible Borrowers For Section 248 Mortgages
HUD 4000.1 states that only “an Indian Tribe or a member of the Indian Tribe may be a Borrower.” However, there are provisions made for situations that feature a non-tribe member co-borrower:
“Where there is a co-Borrower, at least one Borrower must be an Indian Tribe or a member of the Indian Tribe. The Borrower must occupy the Property as their Principal Residence.”
Property Eligibility For Section 248 Mortgages
HUD 4000.1 page 432 states, “The Property must be located on land held by the Indian Tribe or held by the United States government for the benefit of the Indian Tribe. Units in cooperatives are not eligible.”
Section 248 Mortgages And Up Front Mortgage Insurance Premiums
Unlike other FHA mortgage loan programs, there is no Up Front Mortgage Insurance Premium required for a Section 248 Mortgage loan. Annual mortgage insurance premiums are still required.
Appraisal Requirements For Section 248 Loans
Appraisal rules for these transactions are located in a section of the FHA appraisal rules titled, “Appraisal of Single Family Housing on Indian Lands”. This section includes instructions to the FHA appraiser on how to approach property valuation; “The Appraiser must be familiar with the applicable ownership and use restrictions and develop a credible value for the Property. The supply of comparable sales and rental transactions varies by site and by tribe…”
Section 248 Leasehold And Tax Requirements
FHA loan rules for these loans requires the lender to have tax information “on the Leasehold from the tribe and include the payment of such taxes in the calculation of the Borrower’s Mortgage Payment as is done with local property taxes”. Tax issues may vary depending on location, circumstance, etc. Check with your loan officer to see what tax issues may apply to your specific transaction.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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