Family Loan for Down Payment

Jan 15, 2014
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I am purchasing a home, but I am going to get a loan from my parents for the down payment so that I don't have to report that money as income tax.

This is what I am thinking of doing -

Have my parents gift me the $14,000 gift exemption for this year from both parents - totaling $28,000.
The rest of the money will be written up in a loan contract agreement - short term AFR compounded monthly for the duration of 3 years.
The money should be sent directly into my account before the money is put into escrow.
Every month I will pay my parents the interest on the loan and then payback the loan from the $28,000 gift exemption each year.
Parents will report taxes on the interest income for the interest portion of the loan that I borrowed from them.

Would it be a problem if I have my parents put all the money into Escrow instead of my account first? or would it be better to put the money into my account first before Escrow so that I would have some supporting documentation.

Any help or suggestions will be very helpful.


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