Can I lend buyer of my home the closing costs and have them repaid with interest?
Full Question:
Answer:
Many times the lender of the purchase money for the property will have concern if other financing arrangements are not disclosed. Also the federal law requires that all closing costs be disclosed pursuant to the Federal Real Estate Settlement Practices Act (RESPA).
Any costs to the buyer, including repayment of any monies used to purchase the property, would have to be disclosed at closing. There can be no side agreements.
The Act prohibits kickbacks between lenders and third-party settlement service agents in the real estate settlement process (Section 8 of RESPA). Even reciprocal referrals among these types of professions could be construed in court as a violation of the law of RESPA. It requires lenders to provide a good faith estimate (GFE) for all the approximate costs of a particular loan and finally a HUD-1 (for purchase real estate loans) or a HUD-1A (for refinances of real estate loans) at the closing of the real estate loan. The final HUD-1 or HUD-1A allows the borrower to know specifically the costs of the loan and to whom the fees are being allotted. Beginning January 1, 2010, amendments to RESPA restrict the amount that fees can increase between the GFE and HUD-1 or HUD-1A. Origination charges are not allowed to increase, while certain third party service providers' fees can increase by no more than 10%.
