Posted by Ron (MD) on March 11, 2002 at 14:47:16:
…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.