Buyer put down 10% -- honest!

Q: I have a buyer for my house, but she has nothing to put down. Is there a way for me to hypothetically put the down payment for her? I'd increase the selling price by 10 percent and she could finance the rest. I would get my original sales price. Can I order myself a cashier's check for proof of deposit of the earnest money for her lender? That would show that she put down the 10 percent.

A: The short answer is you can't do it this way. The reason lenders want to see evidence of the down payment or earnest money for the purchase of a home is to see that the buyer has some investment in the home. In the past lenders would finance 100 percent of the purchase price. These days 100 percent financing is very hard to get.

What you are trying to do would amount to a fraud on the lender. You would try to deceive the lender into believing that your buyer had put down money that she had not. Then you would participate in the fraud when the buyer applied for a 90 percent mortgage on your home when in fact the mortgage amount would be for the full purchase price of the home.

You can assist a buyer in the purchase of a home. Some loan programs will allow a seller to contribute 3 percent or even 5 percent of closing costs that might be paid by a buyer. If the buyer can qualify for the loan, your closing-cost assistance may be enough. You and your buyers should sit down with a reputable and qualified lender to see if there are any options for you in allowing this buyer to buy your home.

Finally, even if you didn't have the problems with the lender relating to your increase in the purchase price and then claiming that the buyer had put down the earnest money, when the lender appraises the property, the property might not appraise. That is to say, if you were originally selling the property for $100,000 but inflated the price to $110,000 to "assist" your buyer, the appraiser might still come in and say that the property was worth only $100,000. If the buyer was financing 90 percent, the lender would loan the buyer only $90,000 to buy the home. You would end up in the same place you are in now.

Don't attempt to do anything that isn't aboveboard. Finally, you should know that the lender would have wanted to see the source of the earnest money and obtain a copy of the cancelled check. Your buyer would not have been able to prove that she had the 10 percent down payment or earnest money, and the check would have showed that it had come from your account.

If the buyer can't afford to buy your home or you can't figure out a loan program that can work for the buyer, you'll have to find another buyer.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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