The question isn’t whether it is possible to get money back at closing (everyone knows you can get money back in a variety of different ways), the question is whether it’s fraud or not. The bottom line is that if you borrow money from a lender and you misrepresent ANYTHING about the transaction, it’s fraud. Fraud can get you into trouble. Can you committ fraud and not get in trouble? Sure, if you don’t get caught, but then again you can rob a bank and not get in trouble if you don’t get caught. Does that make it right? No.
I think what skydive is asking is: Is there a lender that ALLOWS you to get cash at a closing where you are the buyer in a transaction that you are not misrepresenting any information. To my knowldege there is not such a lender.
That depends on what your definition of ANYTHING is. You may look at my desk and say it is messy, while I say it is in organized stacks. It is the same desk. It just depends on what you call it. It really matters what you call things.
No, it’s not semantics as you seem to suggest. Misrepresent anything means you lead someone to believe something that you know to be untrue.
Some would say that omission of information is not lying, but to omit information because you know to include the information would lead to a different conclusion is indeed misrepresentation.
Fraud is defined as : deception deliberately practiced to achieve an unfair / unlawful gain.
That is also to say that if you omit information either 1) not knowing it’s importance or 2) without intent to misrepresent information then you are not committing fraud.
Intent is a key component of the burden of proof on someone investigating fraud.
So, bluemoon, in your example if I say your desk is messy and you say it’s organized and you know for a fact that it’s not organized, you are misrepresenting your true opinion. Although this example would be virtually impossible to prove because it’s a matter of opinion and because it would be hard to prove that fraud occurred due to the requirement for gain on the deceiver’s part. This example really holds virtually no relevence to the discussion.
I have been able to reapetedly get cash back at closing…but this is not an easy task.
When you make an offer on the house, use time-to-close as an incentive for the seller…in return, ask for about a 12K-20K contribution towards closing costs.
However, on the contract, make sure it state “12K seller contribution” instead of 12K cash towards closing. This allows it to cover broker’s fees, etc, and the leftover cash will go to buyer.
First, you must know which lenders will allow 3% vs 6% seller concession.
this is very tricky, but an experienced mortgage broker working closley with a realtor or investor can pull it off…
I’d be very interested to see a copy of a HUD-1 statement showing this ‘cash back at closing’ that you refer to. Excessive seller concessions require the lender to reduce the loan amount by amount (can also be done at closing via a principle reduction) or for the excessive concessions to be ‘left on the table’. I’ll believe it when I see a copy of a lender approved, fully executed, HUD-1 from a funded loan.
DFWHoldings You are right. The “thing” we are refering to is cash. Is there any way we can call that “thing” a legal term, that will allow the buyer to walk away with it at closing? If there is, we need to call it that. If not then we can’t get it.
We then must wait 12 months and refinance to get the cash out of the house…I just prefer not to wait.
The fraud is based on receiving unfair gain. I am not a lawyer and this is neither advice nor a suggestion for anybody to do this, but if I buy a house with $10k equity, I own the house and the equity. The laws were written with the intent to prevent a person from buying a house worth $100k and by deceitful means getting the bank to finance $110k and the buyer pocketing $10k and thus having no skin in the game and walking on the house and leaving the government to clean up the mess. I never buy a house that can’t support my purchase price, fix up and my equity or cash at closing. Always at LEAST $30k.
DFW…I wouldn’t give you a copy of my HUD statement just to prove a point to s stranger over the internet. But I can assure that I’ve done this about 20 times without exaggeration. If you need proof…Call your mortgage broker and have him/her run the scenerio by his AE from the following Banks:
ABC Direct
SouthStar Funding
New Century Morgage
Meritage Mortgage
These are the only four banks in the US that will lend 100% non-owner occupied, allow 6% seller concession with underwriter approval, and money back to buyer. I’ve built my entire business on this method and it is perfectly legal…but again, not easy.
There is no “grey” area in lending and it’s not based off of a semantic opinion of what “anything” is or even what “fraud” is, or is not.
Simple answer here. If you cannot do what you are trying to accomplish if the primary lender knows (or don’t know as the case may be) about it, then it is fraud, plain and simple.
As DFW said, can you get away with it? And the answer is quite possibly, yes. Does that make it right or legal? No.
As to cash at closing. There are banks that do allow the buyer to receive cash at closing. I posted 7, perfectly legal options that get you $$$ at closing. As to DollarBill’s post, I can personally attest to Southstar (though I don’t like them as a lender), and often times, the smaller local banks are much more inclined to lend off of tax/appraised value as opposed to purchase price, especially when dealing with a valuable, loyal customer.
And while not specifically cash at closing, BB&T (at least was) you could get a 95% of purchase loan and then do an 80% of appraised value no closing cost cashout refinance within 2-3 days.
As I said before, I’m not aware of a lender that allows it but if there are lenders out there that do all the merrier. I underwrite for a wholesale lender and we do not allow it, but then again, we don’t have portfolio loans either.
As long as the lender approves the hud and it’s within their guidelines, excellent. I don’t think people should confuse that with misrepresentation or outside agreements between the buyer and other interested parties to the transaction either.
Well, in truth, the ‘equity’ that you would have in that house would be non-existant until you sold it. Equity is not a tangible asset until you have a buyer willing to pay the difference above and beyond what you owe.
This gets into a whole different discussion but the term ‘equity’ is thrown around very loosely in this industry. In reality, an asset is only worth what someone is willing to pay for it. The fact that you bought the house for $100k means that at that point in time it was worth $100k. Now, you could sell it in 30 minutes for $150K and pull out your ‘equity’ but you could just as easily have an act of god destroy the house and receive an offer for $10k for the lot. The equity only surfaces when you have an actual offer to purchase. Again, this is a whole different discussion but it’s the same concept as someone saying their 69 Pontiac GTO is ‘worth’ 60,000 dollars when I’m only willing to pay 30,000 for it.
I will say if it shows up on the hud-1 and the lender approves it NO it is not Fraud… If its a seperate agreement and paid under the table yes that would be!
I’m a mortgage broker that specializes in investment loans, thus the user name. New Century, Meritage, and Southstar are all nonconforming lenders that specialize in loans for subprime credit. Two of them, New Century and Meritage do not have 100% financing options. They may allow for seller financing beyond their first mortgage of up to 100%, but no 100% just by them. Southstar has full doc 100% but you need a 700 score. Not many investors can go full doc and have the required mid score. ABC is one of my main lenders. They will only fund 100%(1st/2nd combo) themselves if you can go full doc. Their 2nd mortgage guidelines tighten up when going over 95%. Anything over 95% has a negative cashflow restriction and also a 2 year managment requirement. Now they will allow for seller 2nds of up to 100%. This means you can do the 1st mortgage with them and the seller can hold the balance; in doing this the negative cashflow and management history are not enforced since only part of their own 2nd guidelines. In addition, ABC will only do 2% seller concessions for investment properties.
So tell us, when you say they have done 100% loans with these lenders, are you referring to the fact that they allow for the seller to hold the remaining balance?
Has your broker convinced you that raising the sales price above what the seller really wants is ok? Just because a broker has pulled something off for you does not mean it was ok.
These lenders do not allow cash back. Try calling the underwriter directly next time and explaining the structure in full to them. I’m sure they’d have a different perspective than what the broker does.
New Century, Meritage, and Southstar are all nonconforming lenders that specialize in loans for subprime credit. Two of them, New Century and Meritage do not have 100% financing options. They may allow for seller financing beyond their first mortgage of up to 100%, but no 100% just by them. Southstar has full doc 100% but you need a 700 score. Not many investors can go full doc and have the required mid score. ABC is one of my main lenders. They will only fund 100%(1st/2nd combo) themselves if you can go full doc. Their 2nd mortgage guidelines tighten up when going over 95%. Anything over 95% has a negative cashflow restriction and also a 2 year managment requirement. Now they will allow for seller 2nds of up to 100%. This means you can do the 1st mortgage with them and the seller can hold the balance; in doing this the negative cashflow and management history are not enforced since only part of their own 2nd guidelines. In addition, ABC will only do 2% seller concessions for investment properties.