Nehemiah and FHA Helps Home Buyers
Note: As of October 1, 2008, Nehemiah is no longer available, thanks to the Bush Administration. Will it be revived by President Obama? We can have hope. Here is an overview of the way the program used to work before it was canned.
The Nehemiah Program is like money falling from the skies for home buyers. You don’t need to be a first-time home buyer to use the Nehemiah Program, either, but there are a few restrictions. For instance, you cannot buy a vacation home with the Nehemiah Program.
Qualifying for Nehemiah is relatively easy. Home buyers who are approved for an FHA loan, for example, will most likely qualify for the Nehemiah Program.
Nehemiah is a nonprofit organization that was formed in 1994 to help home buyers buy a home. When used in conjunction with an FHA loan, it lets buyers purchase a home, even if buyers don’t have any money. Nehemiah is the largest private down payment assistance program in the country.
It’s a simple concept. The seller gives up to 6% of the purchase price to the Nehemiah Corporation, plus a $599 fee. Nehemiah then gives the donation to the buyer to pay for the down payment and / or buyer’s closing costs. Because it is a gift, the buyer doesn’t need to pay it back.
Nehemiah can supplement a conventional loan or an FHA loan, but it used most often with FHA loans because of FHA’s low down payment requirements. The elements are as follows:
Six-percent of the sales price is a lot of money for a seller to give a buyer. On a $200,000 home, that sum is $12,000. You might wonder: Why would a seller agree to participate in the Nehemiah Program?
To answer that question, let’s look at the variables. There are two basic ways that Nehemiah works. Either the 6% is added to the sales price or it is deducted from the sales price. In some cases, to get 6% back from the seller on a $200,000 home, the buyer might need to pay $212,277. As long as the home will appraise for the higher value, this scenario will work for you.
Some critics say this method forces the buyer to finance the down payment and closing costs by rolling those fees into the sales price. Others say paying a higher sales price is not necessarily bad for the buyer because eventually appreciation will give the buyer equity.
The second method is to find a truly motivated seller who will agree to give the money to Nehemiah out of the sales price. Sometimes, buyers can negotiate an offer resulting in a sales price that is lower than the list price.
Some builders advertise that they will cooperate with the Nehemiah Program. In those cases, buyers who come up with their own down payments and closing costs typically pay less for the home than a buyer who relies on Nehemiah.
It might be easier for a home buyer to approach sellers who really need to sell or for some reason, their home isn’t selling. Consider making purchase offers to those sellers who:
Competing with a lot of similar listings for a buyer’s attention.
Have a good one and let me know if you need anything.