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So your parents are essentially fronting you the closing costs, including prepaids?
... a loan is a loan is a loan, and should be disclosed to the lender. Otherwise, you are committing fraud. If your parents gift you the money, you can always gift them back later, but they can't hold you to it. A gift comes without the promise of repayment.

I would certainly recommend that OP's parents be well able to afford making their contribution as a gift, because Life Happens and they might never see a dime of it again. However, my opinion is that making a gift to immediate family with the understanding that it's a loan doesn't quite rise to the level of fraud. I hope not, anyway. When DH & I bought our 1st house, my parents sent me a $2k check and a signed gift letter. Since legally it was a gift, DH & I had no problem calling it a gift on our loan application. But once we were in the house, we paid it back.

Probably foolish to admit on a public message board, but since that was 33 yrs ago, I hope the statute of limitations has passed and I won't go to jail for it at this point. :)
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