Mortgage loans……..?

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Who does the mortgage lender disburse the loan to. From my understanding, the lender direct deposits the loan into the buyers (borrowers) bank account. Then the buyer cuts the seller a check. Is this correct?
I was not eligible to borrower any funds beyond the asking price. So my mortgage consultant advice me to work out a side deal with the seller. The seller is asking for 40,000. But the consultant said raise the price to 55,000 and let the seller refund the 15,000 to me. So that’s what I did. We (meaning the seller and I) made the purchase agreement for 55,000 and made a side contract (notorized) stating the seller agrees to refund the 15,000 for repairs and rennovations. Even though I have this contract, I am a little skeptical if the seller will follow through without a hassle. Can I arrage it where the lender disburse the 40,000 to the seller and 15,000 to me. What will happen if the lender finds out about our side agreement? Do they really care?

8 Comments
  1. Reply
    Matt J
    May 14, 2011 at 1:37 am

    No, the after the loan closes the fund go the the title company and it splits up the money. The funds are directed by the HUD.

    Matt
    http://www.diversifiedlender.com/
    http://www.minnesota-mortgage-rates.net/

  2. Reply
    Amanda H
    May 14, 2011 at 2:13 am

    NOOOO. I wish, wouldnt it be nice?

    An escrow company handles EVERYTHING. They take the loan funds from the mortgage company, along with a down payment (if applicable) from you and you sign the deed to make teh house yours.

    The escrow company then pays off the original (seller’s)_ mortgage, deducts the seller’s costs, and cuts a check for the remaining amount to the seller.

  3. Reply
    becca9892003
    May 14, 2011 at 2:40 am

    the reason you were told to make a “deal on the side”…is becasue it is not allowed by the lender to have more the 3%-6% seller contributions on a mortgage loan……the HUD can only show the disbursement of funds that are allowed by law…..and your right even though you may have a side contract what you did is risky and if they fail to pay you ….it is you alone who will have to try to get that money back..the realtor and the bank will not help you at all…theres a reason they dont allow these things during the transaction…..good luck…

  4. Reply
    larry r
    May 14, 2011 at 3:21 am

    These are the kind of deals that give the mortgage and real estate industry a bad name. There’s always someone out there willing to break the rules and the result is more regulation and paperwork for the rest of us. People complain about how much paperwork there is for a mortgage. If anyone took the time to read the documents, it would be obvious that what you are doing is not allowable. The loan officer is basically advising you to commit fraud. What I don’t understand is why any loan officer or real estate agent is thinking when they jeopardize their career over a $ 40,000 deal. There are honest ways to solve this problem without getting anyone in trouble. If the property really appraised for $ 55,000, (and the appraiser wasn’t in on this scam) you and the seller can agree on a higher selling price to include some seller concessions. The seller can legally pay up to 6% of the sales price (on some loans) in concessions including buyer’s closing costs, repairs to the house, etc. For most conventional loans, the maximum seller contribution is 3% of the sales price. You could get a first mortgage for the $ 40,000 and have the seller carry back a second mortgage for the balance. The terms of the second can stipulate a discount under certain conditions. What I’m saying is, you can be creative without being illegal.

  5. Reply
    Justin
    May 14, 2011 at 4:14 am

    That is incorrect. The lender disburses their check to the title company. The title company then disburses monies owed to all parties involved, the seller get’s his check minus his costs.

    If the underwriter finds out about your “little side bet” you will get denied before you can blink. The scenario you mention above is a violation of Real Estate Settlement and Procedures Act and is therefore illegal.

  6. Reply
    J O
    May 14, 2011 at 4:25 am

    What you did is totally against the law. Who was your mortgage guy? Chop shops like this are horrible for our industry and consumers at long. He should have his license revoked for approving that loan, and if he encouraged it then he should be fined and placed in prison. Your deal artificially raised prices for all of your neighbors and put your lenders bank at risk. On that deal your lender would be lucky to make 2 grand. I hope it was worth it to him.

  7. Reply
    bianca
    May 14, 2011 at 5:16 am

    what you did is illegal, but many people doing this anyway.
    after the closing the money (whatever the seller will make after selling this property to you)will go to the title company account and they will give check to the seller. the seller then, will give you their check with $ 15000 . technically you are in the mercy of the seller, because you agree to purchase this property for $ 55000 so they don’t have to give you back any money, but good thing is you have agreement with them and i don’t know how this work in your state, but this is the deal we call “under table transaction” without lender any knowledge and you can’t do nothing about directing them how to disperse the money. they will not allowed.
    never hear horror stories, that seller will not give money to the buyer.

  8. Reply
    xugu
    May 14, 2011 at 5:59 am

    Lenders wire the funds to the escrow account. The escrow/title company handles the disbursement, so you’ll be receiving a check from them,

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