Since 1992, The U.S. Department of Veterans’ Affairs has offered a direct loan program for eligible Native American Veterans who want to buy or build a home on federal trust lands. Private mortgage lenders will not make home loans for houses located on federal trust land. That includes the private lenders who make traditional VA loans.

Banks and mortgage companies are in business to make money.  They know that tribes are sovereign nations where state laws do not apply.  That makes it almost impossible for them to get a security interest in a home located on federal trust land.  How do they foreclose if the borrower defaults? With no private mortgage funding available, Native American Veterans living on the reservation needed a mechanism to help them purchase a home. The NADL program was designed to help fill that home mortgage need by offering Native American veterans and their spouses the opportunity to use their VA home loan benefits on federal trust lands.  The Native American Direct Loan (NADL) program is authorized under 38 CFR 36.4527.  Veterans who want to buy or build a home on private land can use the traditional VA-Guaranteed Home Loan Program.

Benefits of NADL Program

The NADL is a benefit qualified Native American Veterans should consider using.  No down payment is required.  There is no private mortgage insurance with the loan, a savings of several hundred dollars per month.  Closing costs are minimal, and the interest rate is often lower than conventional mortgages.  (Currently the fixed rate is 4.25%).  The loan limit follows the Freddie Mac single-family, conventional loan limit, and it is currently $424,100.  The program has other benefits.  It frees up tribal funds to use on other projects; it brings in local builders and jobs for construction workers; and NADL loans are assumable by any qualified borrower.

The First Requirement is a Memorandum of Understanding (MOU)

The Native American applicant must be a member of a federally recognized tribe or Indian Nation.  The first step for the Veteran is to find out if his or her tribe has a MOU with the Department of Veterans’ Affairs.  The MOU is a written agreement between the Indian Nation and the Federal Government.  The Federal signatory is usually the VA, but in some cases, it can be HUD or the USDA.  The MOU makes the tribe responsible for entering into a lease agreement for the land where the house is currently located or will be built.  It also authorizes loan officials to enter the land for appraisal purposes and gives the lender the same rights as any other mortgage holder in the event the borrower defaults on the loan.  You can find a list of those tribes having MOU agreements with the Federal Government for each state on the Veterans’ Affairs website.  In Arizona, the following have MOUs:

The Hualapai Indian Nation, Colorado River Indian Tribes, the San Carlos Apache Tribe, the Gila River Indian Community, the Yavapai-Apache Nation, The White Mountain Apache Tribe, Fort Mojave Indian Tribe, the Navajo Nation, the Hopi Tribe, the Pascua Yaqui Tribe, and the Salt River Pima-Maricopa Indian Community.

Eligibility Requirements for a NADL

To be eligible for a NADL, you must be a member of a tribe having a MOU with the Federal Government.  The purpose of your loan must be to purchase, construct or improve a home on Native American trust land.  You may also obtain a NADL to refinance another NADL direct loan and lower the interest rate. 

There are a number of requirements to be eligible for a NADL.  (1) The loan must be for one of the eligible purposes described above.  (2) The Veteran must intend to occupy the home as his or her primary residence.   The purchase of a rental or investment property is not an eligible purpose.  (3) The Veteran and, if applicable, the spouse are satisfactory credit risks.  (4) The Veteran, and, if applicable, the spouse must have sufficient income to make the monthly loan payments and still have enough left over for family support. (5) There is a funding fee for the loan.  The funding fee for Veterans who saw active duty is 1.25% of the total loan amount.  The funding fee for Veterans who were in the Guard or Reserves is 2.00% of the total loan amount.  The funding fee to refinance a prior VA loan is a minimal 0.50%.  Borrowers have the option to finance the VA funding fee or to pay it in cash.  Either way, the fee must be paid at closing.  There is no funding fee if the Veteran is receiving VA disability compensation or if the Veteran would be eligible for VA disability if he or she was not receiving active duty pay or military retirement.  The funding fee is also waived for the spouse of a Veteran who died from a service related injury.

Steps Needed to Apply For a NADL

As noted above, the first step is to find out if your tribe has a MOU with the Federal Government.  The second step is to apply for a Certificate of Eligibility (COE).  The evidence you need to submit for your COE is dependent on the nature of your eligibility. 

Veterans can obtain a Certificate of Eligibility online by going to the ebenefits portal of the VA website.  They can go to and download the forms and instructions. They can also call 1-800-983-0937 to get help with the application.  To apply by mail, use VA form 26-1880.  Once the Veteran has the Certificate of Eligibility, he or she must contact the VA Regional Loan Center for a loan package.  For those in Arizona, New Mexico, Colorado, Utah or Nevada, the address is:  V.A. Regional Office (PMC-SBC), Attn.: 2IP, Bishop Henry Whipple Federal Building, St. Paul, MN 55111—4050.

Once you apply for your loan, the process will be much the same as any home loan.  There will be an appraisal, a title review, possibly a survey and a title report.  With a NADL, there will also be a lease agreement for the land.  The VA is there to provide help and guidance throughout the process.

The NADL is a very valuable resource for Native American Veterans who desire to own a home on federal trust land.  If you sell the home and pay off the NADL at the time of sale, you can have your entitlement restored and buy another home with your NADL benefit.

“Direct Housing Loans to Native American Veterans on Trust Land.” Cornell University Law School, 10 Feb. 2003, Accessed 20 Mar. 2017.
“Home Loans.” U.S. Department of Veterans Affairs, Accessed 20 Mar. 2017.
“Home Loan Guaranty, Native American Direct Home Loan.” U.S. Department of Veterans Affairs, Jun. 2016, Accessed 20 Mar. 2017.
“Native American Direct Loan.” U.S. Department of Veterans Affairs, Accessed 20 Mar. 2017.