Is cash back at closing legit, legal?

My brother is attempting to purchase a home, and based on what he is saying, it seems very shady. My brother lives in New Jersey, and is planning on buying a home in Maryland, which seems really random. Both he and his wife work in NJ, and will commute back and forth between MD and NJ. It’s 95 miles one way, and they plan to do it twice a day. This doesn’t make sense to me, but anyway… in order to get the mortgage, they have to come up with 3.5% down, or $ 9,400. They say that once they close, they get $ 10,000 so that if my family loans him money he can pay us back after closing. Now, I purchased my home in November of last year, so I know about the process, but I have never heard of anything like this, and from my research, it’s illegal. Is that right? I’m not going to give him any money, but I want to make sure he isn’t getting into trouble.

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