Family loan to go from 10% down to 20% down?

Hi all - I have a question that I haven't been able to answer through the usual google searches, etc. We are looking at buying a house in the Seattle area, and we have cash on hand to pay 10% down...We have received pre-approval to get a loan at 10% down. In addition, a family member has graciously offered us a low interest loan for enough money to get us to 20% down and avoid PMI etc. So here's my question: With all the scrutiny around sudden influx of cash before a loan, is it practical to properly document this family loan and use it towards a down payment without jeopardizing our chances of getting the loan approved? Or would we be better off just getting a loan at the 10% down and then following up later with the family money to pay off principle and hopefully get the PMI removed? We realize we could document this loan as a gift, but we will be paying back the family member and I don't want to misrepresent anything. Thoughts? by jackhalden from Seattle, Washington. Jun 28th 2011 Reply