Expert: liznarr - 4/21/2009

Question
If a buyer does not have money for a downpayment, is it legal for the seller to write the contract for a different amount to cover the cost of closing and downpayment and the buyer now apply and get approved for 100%financing ( ie. seller original sale price is 325k but write the contract for 335k and buyer is approved for 335k)

Answer
Hi Diane

There are still loan programs out there for persons with good credit to get 100% financing.

It would not be illegal if a Seller writes a Contract for a higher amount and includes language within the body of the Contract that he is paying (the increased amount) closing costs of the buyer.  The amount of closing costs the Seller is paying would be disclosed as a dollar amount in the Contract.  You would have to check with the lender in question to see if they would allow any Seller contributions for a Purchaser’s DOWN PAYMENT.

What would be illegal, however, would be for a Seller to write a Contract for a higher sales price amount and give money back to the Purchaser after closing or otherwise credit the Purchaser without the lender being aware.  Since the bank would not know about such a happening, the buyer’s true financing ability would have been intentionally misrepresented to the bank; and that is FRAUD.

I hope the above answers your question.  Feel free to write again if you have additional questions.

Regards,
Elizabeth