VA Direct Loans for Native Americans

Updated: January 4, 2023
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    VA Direct Loans are offered to help qualifying Native American veterans apply for a home loan using VA benefits. But the VA Direct Loan program is different than the standard VA mortgage loan, and only qualified Native American veterans may apply.

    VA Direct Loans for Native Americans

    Changes to the VA loan program overall starting on Jan. 1, 2020 make VA Direct Loans to qualifying Native American service members easier to get. Those changes include eliminating loan limits and expanding who may apply for a VA loan without a funding fee.

    What kind of changes specifically affect VA Direct Loans? The alterations include:

    • VA Loan Funding Fees-Guard and Reserve members now pay the same amount as active duty service members, and the active duty funding fee increased slightly.
    • Purple Heart – If you are an active duty Service member who has earned a Purple Heart, the VA loan funding fee can be waived if you provide proof of a Purple Heart prior to your closing date.
    • Conforming Loan Limits – Borrowers who seek “jumbo” loans, or veterans living in higher-cost markets will have no Federally-established conforming loan limit maximums.
    • Native American Direct Loan – The new law removes the loan limit of $80,000 for Veterans using their entitlement for a VA Native American Direct loan to build or purchase a home on Federal trust land.

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    What Are VA Direct Loans?

    The VA official site states that the Native American Direct Loan (the formal name of the program) is intended specifically as a way for qualifying Native service members to use VA loan benefits for properties on federal trust lands.

    These loans function in a similar fashion to VA mortgages issued by a participating lender, but they are issued directly by the Department of Veterans Affairs, hence the name “Direct Loan.”

    That is NOT how the VA loan program works for most veterans who are not Native or indigenous American members of the U.S. military and who are not buying homes on federal trust lands.

    Typical VA mortgages are handled by a private company–a participating lender who meets VA standards and gets the proper training.


    VA Native American Direct Loans do not involve a private company, third-party lender. Home loan funds come to the applicant directly from the government.

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    What Can Direct Loans Be Used To Do?

    You can buy, refinance, build, or improve a home using a Direct Loan. However, the home must be located on tribal land (see below).

    What Are Federal Trust Lands?

    The official site of the United States Bureau of Indian Affairs (BIA) states, “Tribes are sovereign governments and trust lands are a primary locus of tribal authority.”

    The BAI site adds that many federal programs including the VA Native American Direct Loan program is only offered in cases where reservations or trust lands are involved.

    Benefits Of The Native American Direct Loan

    There are many advantages with a Native American Direct Loan. First Nations veterans who wish to buy, build, improve, or refinance a home on trust lands have a variety of advantages over borrowers who cannot use VA loans or the Direct Loan benefit:

    • Zero downpayment
    • No penalty for early payoff
    • Low VA loan funding fees
    • VA Loan Funding Fee waiver for VA-rated disabled veterans
    • No VA-required Private Mortgage Insurance
    • Low interest rates
    • Low closing costs
    • Fixed-rate 30-year mortgage
    • This benefit may be re-used

    Who May Apply For A VA Direct Loan?

    The VA official site states that in order to qualify, the Native American / indigenous/ First Nations applicant must meet the minimum time-in-service requirement for the VA loan benefit. This requirement varies depending on when you joined the military, so be sure to ask a loan officer or a VA representative about your specific era of enlistment.

    Like a typical VA mortgage loan, once you have met the minimum time-in-service standards, you must apply for a VA Certificate Of Eligibility (COE) and have enough entitlement to use for your home loan. You can apply for a COE online at the VA official site, or you can call the VA at 1-800 827-1000 to request assistance with completing the form.

    To qualify for the Direct Loan program, your mortgage must be for the purchase, construction, or improvement of a property that is located or will be located on federally-recognized trust lands.

    These loans are also available for real estate on what the VA describes as, “allotted lands, Alaska Native corporations, and Pacific Island territories” according to the Department of Veterans Affairs.

    Who May Not Use A VA Native American Direct Loan

    Native American Direct Loans are not offered for buyers looking for properties located outside federal trust lands or any of the other allotted lands or territories described above. Borrowers who want to buy real estate on trust lands must be eligible to live on those lands.

    Those who would be otherwise eligible for a Native American Direct Loan but are not looking for property on federal trust land may be required to use the typical VA home loan application process with a third-party participating lender.

    How To Apply For A Direct Loan

    It is first required that you determine whether or not the tribe has a Memorandum of Understanding on file with the federal government. The Department of Veterans Affairs has an interactive map you can use to determine which tribes have an MOU on file.

    You will also need contact information for the Regional Loan Center of jurisdiction over your potential direct loan. Call 1-877-827-3702 to get assistance with the initial paperwork, requirements, and further information once you are ready to move forward. You will be given instructions on where to download or complete the initial forms and submit your Certificate of Eligibility information where required.

    Rules You Should Know About Applying For A Native American Direct Loan

    The Memorandum Of Understanding Requirement

    The Native American Direct Loan program run by the VA does not automatically approve all loan applications from financially qualified borrowers. In order to qualify for this program, you must be purchasing land on property where, as the VA reminds, the tribal government there has signed a Memorandum of Understanding (MOU) with the Secretary of Veterans Affairs.

    According to the VA, “The MOU spells out the conditions under which the program will operate on its trust lands.” Without the MOU, the purchase of a home on a specific tribal land may not be possible.

    What Is Required To Obtain A MOU For The Native American Direct Loan Program

    Tribal governments or similar entities must sign a document agreeing with the federal government to establish rules or enforce existing procedures, “…that apply to the conveyance of a leasehold interest in real property by an American Indian borrower/mortgagor to a lender, Federal Agency or their assignee as security for the loan.”

    This agreement would include acknowledging and enforcing specific processes for “foreclosing the interest, eviction and procedures for resale of the lot or the dwelling (or both) purchased, constructed, rehabilitated or refinanced using the proceeds of the loan.”

    These quotes are taken directly from the official MOU. Some of the document is designed to insure that effective partnerships and cooperation are established by the Memorandum. One example:

    “With regard to any loan submitted to HUD, VA or USDA for guarantee or insurance, the authorizing Federal Agency shall have the same rights as the lender with regard to that loan and the security.” The agreement stipulates that “No action” that requires the lender’s agreement can be taken unless the VA “also consents.”

    For Tribes Without A Current MOU

    The VA encourages tribal governments without a current MOU with the Department of Veterans Affairs to please contact the Regional Loan Center of jurisdiction. Those interested in seeking a direct loan on tribal land without an MOU are encouraged to do the same.

    VA Loan Occupancy Rules

    The VA official site states that borrowers eligible to apply for a VA Direct Loan must meet the same occupancy requirements as a typical VA mortgage.

    That means at least one borrower obligated on the mortgage will occupy the property as the primary residence, and the home cannot be used as an occasional-occupancy property like a timeshare or vacation home.

    Borrowers Must Financially Qualify

    Like ordinary VA mortgages, applicants must qualify for the loan with credit scores, income, and be able to realistically afford the mortgage.

    VA Loan Funding Fees Apply

    As with other types of VA mortgages, VA Direct Loan borrowers may finance the VA funding fee or pay it in cash. The fee must be paid in full in either case. Some Native American Direct Loan applicants will never have to pay a VA loan funding fee. This is true for all veterans who:

    • Receive VA compensation for a service-connected disability
    • Would be entitled to receive compensation for a service-connected disability if not for the receipt of retirement pay or active duty pay
    • Is a surviving spouse of a veteran who died on duty or as a result of military service
    • Is an active-duty recipient of the Purple Heart and provides proof of this before closing time.

    VA Loan Funding Fee Refunds

    Those who are waiting for VA determination for service-connected medical claims and have not had their records officially updated may be required to pay the VA loan funding fee as though they were not exempt, then apply for a refund of the funding fee once the VA has officially updated the veteran’s records.

    Such refunds are never automatic and must be applied for. Call the VA directly at 1-800 827-1000 to get instructions on how to apply for your VA loan funding fee refund and be sure to have your loan paperwork and details handy when you call.

    Restrictions On The Native American Direct Loan

    Native American Direct Loans can be used to primary residences only. The home you buy must be classifiable and taxable as real property, which means no recreational vehicles, houseboats, or mobile homes not intended to be affixed to a permanent foundation.

    You cannot purchase a home using a VA mortgage (Direct loans or otherwise) to operate commercial enterprises, buy property that is not primarily residential, or property where the non-residential use of the home interferes with the residential nature of the house.

    Refinancing With A Native American Direct Loan

    You may be permitted to refinance a mortgage using a Direct Loan, but you will not be permitted to skip payments-the loan must be brought current at closing time one way or the other whether that is by paying off any late or missed payments, including them into the new loan amount, having the missed payments forgiven, etc.

    Borrowers are free to sell, transfer, or dispose of the property at any time and there are no restrictions on resale except for any applicable tribal or territorial laws that may affect the transaction.

    Cash Back At Closing Time

    All VA mortgages including Native American Direct Loans have a restriction on cash back to the borrower at closing time when the loan transaction is not specifically designed to do so (such as a VA cash-out refinance loan).

    Borrowers applying for new purchase mortgages under the Direct Loan program should not expect or receive cash back except for certain refunds that may be allowable under VA loan rules.

    About The AuthorJoe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

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