No down payment with "properly" written purchase agreement?

[Bryan Hudson]

Some time ago, better than 5 years now, I encountered a couple who claimed they avoided the down payment by often taking care of it in the purchase agreement.  

Their claim, was that they would get the seller to agree to what was tantamount to a phantom down payment, or write up the PA for more than the selling price to cover the LTV on the LOC, the HELOC or the mortgage.

I don't so much question the technique as I question the legality of it all?

[Wayne Brooks]

Your typical financing isn’t going to allow this....there are limits to the closing costs a seller can pay for a borrower and the lender will Require you to show the down payment available in your checking account, and it will be a line item on your closing statement.