…the reason the buyers can get in with little or no down is because you (the seller) are paying for everything (plus a fee to Nehemiah).
Buyers getting FHA loans are supposed to contribute at least 3% toward the deal. However, gift funds (e.g., from Nehemiah) count toward that 3%. The way it works is, you give Nehemiah 4% of the sale price. They, in turn, give your buyer 3% (and pocket 1%).
That won’t cover all the buyer’s closing costs, so you probably are also kicking in 6% (or so) additionally (which is allowed by HUD). All told, you are kicking in 10% of the sales price toward the buyer’s closing costs.
This works best if you can bump the sale price of the house to accommodate the big contribution (but, the house does have to appraise for the higher price), or you are very motivated to sell and are willing to give away that much of your profit.
I don’t think it’s a catch at all as long as you understand (as the seller) that you’re paying for the buyer’s DP and the 1% fee. It’s a GREAT PROGRAM. I use it all the time as a mortgage broker and we used it as an advertising tool when we sold our rehab property.
We did that too for our buyer – we did full Nehemiah which covered the buyers DP and then we paid 4% towards the buyers costs and pre-paids. He got in for about $400 with an FHA loan! We did NOT lose our profit because we added it to the sales price (yes the house has to appraise high enough).
Nehemiah is a great program for your buyers. Think of all the people out there who qualify but haven’t been able to save enough money. This opens the doors for those people.