Probably a lot of shady things would have to play together perfectly to pull this off. You would have a hard time protecting your 3%. It is probably fraud. I wouldn't do it.
If they are buying FHA they have to prove that they did not borrow the down payment. I recently had to sign a letter for my brother that stated that I gifted $xxxx so that he could get his FHA loan. I think what you are talking about is not legal. Call any lender that deals with FHA; this is a pretty well known loan type.
Bryan O., Note Capital | http://www.notecapital.us
I don't know if it is necessarily "illegal" maybe more like working a loop hole? It would be like doing a live-in flip; where the owner occupies the residence and flips it while they live there. In this case the occupant is your business partner and the company you set up could fund the down payment or you could gift it to him? You would have to occupy the residence for at least a year I believe? Check with a real estate attorney and or a loan officer.
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