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Can a home seller help a home buyer with a down payment by paying rent?

Normally, if a home seller helps a home buyer with a down payment, the bank wants to know about it, and will count it against the home buyer when approving the mortgage. But what if the home seller agrees to rent the house back from the home buyer, and pay the rent in advance? Is that a loophole that lets a home seller help a home buyer with the down payment without having the bank count it against the home buyer when approving the mortgage?

Asked By: x4294967296 - 9/24/2009
Best Answer - Chosen by Asker
No, I assure you this scenario wouldn't even be submitted to the mortgage underwriter. It just doesn't fit... More
Answered By: Carol - 9/24/2009
Additional Answers (4)
The bank isn't going to buy your logic. Worse, you will create paperwork that looks like taxable income to the buyer.
Answered By: v b - 9/24/2009
 
That would be legal according to mortgage laws. Contract law and rental laws may differ depending on area. The seller could also legally "purchase" a $5000 pencil from the buyer, prior to the home sale.
Answered By: Synful Visions - 9/24/2009
 
I don't think so. First, when you apply for the mortgage you will not yet be entitled to collect rent since the seller is the owner. It also would put it into the category of rental property, which is not attractive to lenders right now. They'll want to see that any money you are counting on has been in the bank for... More
Answered By: doinou - 9/24/2009
 
Your mortgage would then be classified as non-owner occupied which no mortgage companies are doing these days. It's considered rental property & rates are higher and so is the down payment if you do find someone to do the loan,.
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Answered By: Beverly S - 9/25/2009
 
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