Former client of mine was denied a loan through 2 mortgage brokers.

A couple months later after client moves to another state calls me to inform me that he has been approved for a loan and will be buying a brand new home.

This person has judgements (evictions, unpaid bills, etc) on their credit report. They have never owned a home before and I suspect a car too since he previously used public transportation.

He states that he is recieving financing which he will get back between 15-20K upon the sale of the home to him in order to pay off bills.

Is this possible or is this person just bitter? If so, what type of financing program do you think he may be using?

Because if this is possible I have a customer with really poor credit that is pretty much in limbo right now (lenders will not approve).

Forget to mention something else...this person stays in the same industry but changes jobs every 6 months and his addresses associated with his credit file showed that for the past 5 years he has moved every year which might explain the evictions.

Let's keep in mind that as a lender it is not your job to pass judgement on a persons credit file. The bottom line is can they meet the guidelines. The example you stated above is very likely. The first part is the credit score. Beyond that the key word here is employed within the same industry for six years. Late payments and collections are usually a wash if you can show payment by closing. Mortgage lates are different then rental late payments. In some cases a simple letter of explination can help with exceptions in underwritting. The problem with all of this is property appraisal. If the customer needs $20k to pay off existing debts before closing then the properties appraisal needs to come in high enough to support this. $15-$20k above market with $0 Down would be a hard deal to find! Builders have had a harder time selling models and are likely to offer programs that would assist buyers to sell a property. It's not likely the consumer will receive a cash payment. Lenders usually require a title company to issue payments from closing. I think the real key here is finding a creative mortgage broker that can think outside the box. BY simply presenting to underwriting a few payoffs that would result in a higher credit score that would result in meeting their guidelines the deal would pass.

maybe there is seller financing? even if you have bad credit but if a seller can hold a second you are in the house.

Yes it is absolutely possible to get financing even with bad credit. I'm a Loan Officer and I have done many refinances for people who have bad credit even below 500.

seller financing may be another possiblity, and so is if he had cash for it etc. theres many ways this could happen.

Purchase loans to individuals with banged up credit are no problem.

Sub 500 can be done for refis, not purchase unless a considerable amount of money down is available and the rate will be quite high.

Here is the problem. If the seller is giving the buyer money to pay his bills and the money is not disclosed on the HUD- that is mortgage fraud.

Almost no lender allow this. VA will allow some money to pay bills.

Obviously he does not need these bills paid to qualify as he is receiving the money after closing. If he needed bills paid to quailfy they would be paid buy the BUYER before or at closing- on HUD. Not after closing.

If anyone is mentioning "cash back' on a purchase, time to move on. Do not get involved in that.

This is not for a refi. It's a first time home buyer with bad credit wishing to get close to 20K to pay bills.

From what I've read, it seems like this transaction would be illegal.

You are correct, it is illegal.

No cash can go back to the buyer or any other 3rd party unless it is on the HUD.

Several people have to jail for this here in FL. It has been all over the papers.

The scam normally starts with the investor or buyers agent asking if the seller will sell for more than the asking price. Normally the realtor, investor, mortgage broker and appraiser are involved.