What HeritageOne Mortgages Are Designed For
HeritageOne mortgages serve Native American borrowers and properties located within eligible tribal areas. These loans follow most standard Fannie Mae guidelines but include specific accommodations for tribal land ownership structures and community needs.
The program recognizes that Native American homeownership often involves unique circumstances. Properties may sit on tribal trust land, borrowers may have limited credit histories, and communities may lack traditional real estate infrastructure.
Loan Amount and Property Limits
Your HeritageOne mortgage cannot exceed the conforming loan limits that apply to your area. These limits change annually and vary by county. For 2024, the baseline limit is $766,550 for most areas, with higher limits in expensive markets.
The loan amount restriction follows the same rules as conventional Fannie Mae loans. If you need to borrow more than the conforming limit, you'll need a jumbo loan, which isn't available through the HeritageOne program.
Eligible Transaction Types
HeritageOne mortgages work for two specific purposes: buying a home or refinancing your current mortgage without taking cash out.
Purchase transactions include buying an existing home, building a new home, or buying land and constructing a home simultaneously. The program supports both traditional site-built homes and manufactured homes that meet Fannie Mae's requirements.
No-cash-out refinances let you replace your current mortgage with a new one, typically to get a better interest rate or change loan terms. You can receive up to $2,000 in cash back at closing to cover transaction costs, but you cannot tap into your home's equity for other purposes.
Cash-out refinances are not permitted. If you want to access your home's equity, you'll need a different loan program.
Secondary Financing Options
HeritageOne mortgages allow certain types of second mortgages to help with your down payment or closing costs.
Standard secondary financing must meet Fannie Mae's general requirements in [[Section 4204.1]]. This includes down payment assistance loans from government agencies, nonprofits, or employers.
Affordable Seconds programs are also permitted with some modifications. These are typically low-interest or deferred-payment second mortgages designed to help moderate-income borrowers. For HeritageOne loans, the organization providing the Affordable Second can have relationships with your lender that wouldn't normally be allowed.
If you're using a temporary buydown plan to reduce your initial payments, any second mortgage must have a fixed interest rate. This prevents payment shock if both your first and second mortgage rates adjust upward simultaneously.
Using Rental Income to Qualify
HeritageOne mortgages let you count rental income from several sources when calculating your qualifying income.
For single-family homes, you can include rental income if you're buying a property with a separate rental unit or accessory dwelling unit (ADU). The rental income must meet Fannie Mae's standard verification requirements in [[Section 5306.1]].
If you're buying a 2-4 unit property, rental income from the other units can help you qualify. Your lender will typically use 75% of the projected rental income after accounting for vacancy and maintenance costs.
Rental income from investment properties you already own can also count toward qualification. Your lender will need lease agreements, rent rolls, and tax returns showing the rental income history.
Education Requirements for First-Time Buyers
All first-time homebuyers using HeritageOne mortgages must complete homeownership education before closing. This requirement applies when every borrower who will live in the home is a first-time buyer.
The education can come from HUD-approved counseling agencies, online programs, or classroom courses. Native community development financial institutions (CDFIs) can provide this education even if they're also your lender, which creates flexibility in tribal communities.
You must complete the education before your loan's note date. For construction loans that convert to permanent financing, you have until the permanent loan begins.
The education covers topics like budgeting, home maintenance, understanding your mortgage terms, and avoiding foreclosure. Most programs take 6-8 hours to complete.
Landlord Education for Multi-Unit Properties
If you're buying a 2-4 unit property with a HeritageOne mortgage, at least one borrower must have landlord knowledge before closing.
You can satisfy this requirement in two ways: complete a landlord education program or demonstrate at least one year of previous landlord experience. The education covers tenant screening, lease agreements, fair housing laws, property maintenance, and financial management.
Previous landlord experience must be documented through tax returns showing rental income, lease agreements, or other evidence that you've managed rental property for at least 12 months.
For refinances of properties you already own and rent out, landlord education is recommended but not required.
Potential Complications with Tribal Land
Properties on tribal trust land create unique title and foreclosure issues that can complicate HeritageOne mortgages. The tribe may retain certain rights to the property, including a right of first refusal if you decide to sell.
Any right of first refusal must run to the eligible Native American tribe where your property is located. If you're leasing the land from someone other than the tribe, they may also have first refusal rights.
These rights are limited during foreclosure proceedings. If your loan goes into foreclosure or you pursue a short sale, the right of first refusal expires 120 days after written notice that the property is being offered for sale.
Required Documentation
Your lender will need standard mortgage documentation plus any tribal-specific paperwork. This includes income verification, asset statements, credit reports, and property appraisals.
For rental income, provide lease agreements, rent rolls, and tax returns showing rental income history. If you're claiming landlord experience, gather documentation proving you've managed rental property for at least one year.
Education certificates must be provided before closing. Keep copies of your homeownership education completion certificate and any landlord education credentials.
Properties on tribal land may require additional title documentation, tribal resolutions, or lease agreements that establish your right to occupy and improve the property.
References
For the official guidelines, see 4504.5: General eligibility requirements for HeritageOne® Mortgages in the Fannie Mae Selling Guide.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Homebuyer education
Landlord education for 2- to 4-unit properties
Right of first refusal
The following general eligibility requirements apply to HeritageOne
®
Mortgages:
(a)
Loan limits
The loan amount may not exceed the applicable maximum original loan amount specified in
Section 4203.1(c)
.
(b)
Mortgage purpose
The Mortgage must be either a purchase transaction Mortgage or a “no cash-out” refinance Mortgage.
(c)
Temporary subsidy buydown plans
Temporary subsidy buydown plans described in
Section 4204.3
are permitted if the Mortgage is:
Secured by a 1-unit property; or
An Accept Mortgage secured by a 2-unit property
(d)
Secondary financing
The following are permitted secondary financing arrangements:
Secondary financing that meets the requirements of
®
that meet the requirements of
, except that:
For Affordable Seconds provided by an Agency, although
Section 4204.2(a)(i)(A)
provides otherwise, the Agency may be affiliated with, under contract to or financed (directly or indirectly) by the Seller as the originating lender
For Seller-funded Affordable Seconds, although
Section 4204.2(a)(i)(B)
provides otherwise, the First Lien Mortgage cannot be a Home Possible
®
Mortgage and may be a HeritageOne Mortgage
For Mortgages secured by Manufactured Homes and originated with Affordable Seconds, although
Section 5703.5(c)
provides otherwise, the Mortgage cannot be a Home Possible Mortgage and may be a HeritageOne Mortgage
For a Mortgage with a temporary subsidy buydown plan, any secondary financing must have a fixed interest rate.
(e)
Rental income
When determining the stable monthly income (as described in
Section 5301.1
), rental income may be considered if generated from:
A subject 1-unit property, with or without an ADU, if the rental income requirements in
Section 4501.6(a)
or
5306.1(h)
are met
An ADU on a subject 1-unit property, if the rental income requirements in
Section 5306.1(g)
are met
A subject 2- to 4-unit property, if the rental income requirements in
Section 5306.1(e)
are met and excluding any rental income generated from an ADU
A non-subject investment property, if the rental income requirements in
Section 5306.1(c)
are met
(f)
Homebuyer education
For purchase transaction Mortgages where all occupying Borrowers are First-Time Homebuyers:
At least one occupying Borrower must complete a homeownership education program before the Note Date or, for Construction to Permanent Mortgages and Renovation Mortgages, the Effective Date of Permanent Financing; and
Section 5103.4(b)
, homeownership education may be provided by a Native community development financial institution (CDFI), even if the Native CDFI is the originating lender and/or the Seller
Section 5103.4
for other requirements related to homeownership education.
(g)
Landlord education for 2- to 4-unit properties
For purchase transaction Mortgages, at least one qualifying Borrower must:
Complete a landlord education program before the Note Date or, for Construction to Permanent Mortgages and Renovation Mortgages, the Effective Date of Permanent Financing; or
Have at least one year of previous landlord experience
For “no cash-out” refinance Mortgages, landlord education is not required but is recommended for Borrowers who have not previously completed a landlord education program.
Landlord education may not be provided by an interested party to the Mortgage transaction, except for a Native CDFI. A Native CDFI may provide landlord education even if the Native CDFI is the originating lender and/or the Seller.
(h)
Resale restrictions
The Mortgaged Premises may be subject to resale restrictions if the requirements of
Chapter 4406
are met.
(i)
Any right of first refusal must run to:
The Eligible Native American Tribe within whose Tribal Area the Mortgaged Premises is located; and
Any lessor other than the Eligible Native American Tribe (if applicable)
When the Mortgage is subject to foreclosure proceedings and/or an approved short sale, the right of first refusal may not continue beyond 120 days after the date of written notice that the Mortgaged Premises is being offered for sale.
Any right of first refusal may not adversely impact the rights of Freddie Mac or the Seller/Servicer to foreclose or acquire title to the Mortgaged Premises, accept a deed or assignment in lieu of foreclosure or transfer title to or lease the Mortgaged Premises, if acquired.
