Here is a letter that came to me from a knowedgeable Minneapolis area loan officer. It explains a program that will be helpful to Minneapolis home buyers who might have difficulty coming up with cash to close. I thought it would be worth sharing with you:
The Nehemiah program is a non profit program that is available for existing properties and new construction. Basically it is a program where the seller can contribute up to 6% of the selling price to go towards the buyer’s down payment, closing costs and pre-paid expenses.
The 6% needed for the down payment, closing cost and pre-paid expenses works like this; the seller signs a participation form agreeing to the terms which are fairly straightforward. After the sale is complete (HUD 1) the seller makes the contribution of 6% to Nehemiah who in turn gifts the funds to the buyer after the gift letter is signed. Funds would be wired to the title company prior to close, so there will be paper work that gets done prior to close.
This will be a program that will be popular for buyers and sellers so you will want to talk with your sellers too. The fee for this program is $295.00 (cheap) seller, buyer or mortgage company can pay the fee. This is also an FHA program so the buyers will get great rates.
There is specific verbiage that has to be written on the Purchase Agreement which I will paste below.
1) It should be written as FHA financing with a 2.25% down payment. (As long
as Nehemiah is gifting down payment, closing costs, and prepaid expenses. Therefore, there are no seller concessions on the deal).
2) The following sentence must be written on the FHA financing addendum: “Seller agrees to pay 6% of the sales price + $295 to Nehemiah.” Six percent is a general rule, and the lender can calculate a GFE that will give you a very good estimate of what the buyer needs to purchase this property.
Summit Mortgage Corporation
P.S. The FHA limit for the 7 county metro area is 365K. the upfront is 1.5% of the base loan amount on all properties. The monthly is .50% of the base loan amount.