Will this cause concern on the part of the lender??

[Anonymous]

Our real estate agent agreed to give us a $1,000 credit towards closing costs out of his comission. We ended up getting the seller to pay all of our closing costs, so don't need it for that, but he still is going to give us a rebate on the commission. First, he was going to give us cash back at closing, but we are going fha and the lender says we can't take cash at closing on an fha loan (we couldn't even take cash from the seller for repair costs, had to reduce the price of the house instead). She also said that he would have to give the seller the credit and have them add $1000 to the concessions to make it kosher for fha. So, we were going to rewrite the contract to credit the seller on the commission and increase their concession to buy down our rate to 4.5% and pay the upfront HOA fee that is due at closing, which combined would be just under $1000. Now, he is thinking that instead of writing an adendum to the contract (we left it out of the original contract because we weren't sure how we were going to handle it at the time), he will just give us the cash outside of closing. He says it won't be an issue as he will call it a "rebate" for IRS purposes and doesn't seem worried, but it seems shady to us. Here is my concern, the lender knows we were going to get the credit, so now if we now leave it out but still buy down the rate, will she question it? We have the $$ in our account and can prove where it came from (2nd job). We would just use $$ we had set aside for some repairs we planned to do after closing and then use the money from him to do those repairs. The benefit to us would be that we would get a little more $$ because the concessions the seller has already made plus the $1000 would be more than we would owe in closing costs, prepaids, buy down and HOA fees, so the difference would be refunded to the seller if we did it as part of the closing. Does this make sense? Are we setting ourselves up for trouble if we do this?

[Anonymous]

anyone?

[ShanetheMortgageMan]

Any exchange of money related to a mortgage transaction must be reflected on the HUD-1 settlement statement - so getting cash rebate from your agent outside of closing wouldn't be acceptable.  FHA allows your real estate agent to give you a credit, just like in the same manner the seller is, it's all covered under "seller contributions", here is verbiage from FHA:

A. Seller Contributions. The seller (or other interested third parties such as real estate agents, builders, developers, etc., or a combination of parties) may contribute up to six percent of the property's sales price toward the buyer's actual closing costs, prepaid expenses, discount points, and other financing concessions. Contributions exceeding six percent of the sales price or exceeding the actual cost of prepaid expenses, discounts points, and other financing concessions will be treated as inducements to purchase, thereby reducing the amount of the mortgage. Closing costs normally paid by the borrower are considered contributions if paid by the seller. Inducements to purchase are described in paragraph B, below.

The six percent limitation also includes seller payment for permanent and temporary interest rate buydowns and other payment supplements, payments of mortgage interest for fixed rate mortgages and GPMs only (but not principal), mortgage payment protection insurance, and payment of UFMIP.

Fees typically paid by the seller under local or state law, or local custom, such as real estate commissions, charges for pest inspections, fees paid for trustees to release a deed of trust, etc., are not considered contributions. The dollar limit for seller contributions is calculated by using Attachment A on the HUD-92900-PUR/HUD-92900WS. Each dollar exceeding FHA's six percent limit must be subtracted from the property's sales price before applying the appropriate LTV ratio. 

B. Inducements to Purchase. Certain expenses (beyond those described above) paid on behalf of the borrower, as well as other inducements to purchase, result in a dollar-for-dollar reduction to the sales price before applying the appropriate LTV ratio. These inducements include decorating allowances, repair allowances, moving costs, and other costs as determined by the appropriate HOC. We also require dollar-for-dollar reductions to the sales price for excess rent credit (see 2-10 N), as well as for gift funds not meeting the requirements stated in Chapter 2.

Personal property items such as cars, boats, riding lawn mowers, furniture, televisions, etc., given by the seller to consummate the sale result in a reduction to the mortgage. The value of the item(s) must be deducted from the sales price and the appraised value of the property (if not already done so by the appraiser) before applying the LTV ratio. However, certain items, depending upon local custom or law, may be considered as part of the real estate transaction with no adjustment to the sales price or appraised value necessary. These items include ranges, refrigerators, dishwashers, washers, dryers, carpeting, window treatments, and other items as determined by the jurisdictional HOC. That office determines if these items affect value and are considered customary. Replacement of existing equipment or other realty items by the seller before closing, such as carpeting or air conditioners, does not require a value adjustment provided no cash allowance is given to the borrower.

In addition, if the seller or builder of the property agrees to pay any portion of the borrower's sales commission on the sale of the borrower’s present residence, the amount paid by the seller or builder is an inducement to purchase and must be subtracted dollar for dollar from the sales price before the LTV ratio is applied. Similarly, a borrower not paying real estate commission on the sale of a present home constitutes a sales concession, if the real estate broker or agent is involved in both transactions and the seller of the property purchased by the borrower pays a real estate commission exceeding that typical for the area. In these situations, the amount paid by the seller above the normal real estate commission is considered an inducement to purchase and must be subtracted from the sales price of the property being purchased before applying the LTV ratio.

[Anonymous]

Thank you! I thought there might be a regulation prohibiting that .I will have him write it up in the contract and make sure we do it the right way.