Okay they didnt explain it at all. Sorry about this. Let me explain exactly how it works. Im going to use small numbers. And they wont be perfect but it will give you an idea.
Lets say you are looking to buy a home. The home is 100,000 dollars. You have no money for a down payment and no money for closing cost.
As a buyer on an FHA product you have to put 3% down. Meaning the bank will give you 97,000 and you put down 3,000, they seller gets 100,000. Then you pay 3% of your closing cost. Final cost to you is 6,000. 3% for the down 3% for the closing cost. Seller walks away with 100,000.
The seller cannot pay your down payment, FHA doesnt allow it, so they use a loop, Nehemiah is a non profit company. Heres how it works.
- Sells Price 100,000
- Seller changes sells price to 106,200
- FHA lends now 97% of 106,200 Approx 103,000
- Nehemiah Sends the the title company 6,000 to cover your down and closing cost.
- Seller sends back Nehemiah 6,500 (down payment closing cost and Nehemiah 500 dollar fee)
- Your total loan amout is 100,000 + your 3,000 in closing cost.
- Seller walks away with 100,000. You get 100% loan, and your closing cost are added to your mortgage.
- Seller didnt make any extra. All you did instead of having a 97,000 dollar loan and 6,000 in closing cost. You changed it to 103,000 dollar loan with no down payment and no closing cost.
- No Nehemiah never comes back on what they call a gift, because the only way that gift is executed or given to you is if the seller gives the exact same amount to them plus 500 dollars.
They should have explained this too you. You were not screwed or scammed. Nehemiah or FHA wouldnt allow it. They just did a really bad job explaining it. In the end all you did was add your closing cost and your downpayment to the loan. This is the only legal way to do it. BUT THEY GET A HUGE "F" IN EXPLAINING IT!!!!
Ive done maybe 10 of these this year and im closing another one today. They are safe but I explain it a hell of alot better.
Send me an email I can look at your Huds and tell you if you got screwed. Im sure you didnt, there are many regulations that follow these programs.
Look at one thing. What was the sells price of the home. Say 100,000 what was your closing cost say 3,000. Your loan amount should be the sales prices plus the closing cost. Making your loan amount 103,000. Thats what it should be. Look at your sales prices and add your closing cost and thats your loan amount, if they did it right.
To calm your fears about the loan officer being paid double. Its not possible 3% is already taken for the down. The most Nehemiah can give is 6%. That leaves 3% for closings cost (thats about right).
If its a 200,000+ house 7,000 added to the sales price for your principal balance sounds about right.
PS Nehemiah Didnt give you a DAMN PENNY. The seller gave it to Nehemiah to give it to you, Nehemiah charge the seller 500 dollars to do it. Its not a gift, its a loophole. Nehemiah just doesnt walk around giving out money because of the goodness of their heart, the seller legally gave it to you, through nehemiah. The loan officer didnt get paid twice, Nehemiah paid your closing cost and down, the seller paid nehemiah. Its just a legal way for the seller to do it, so you dont have a down payment. Its that simple.
15 years mortgage real estate exp. Trained FHA, VA Conv underwriter.