“Have they told their mortgage broker the money from you will be a loan? Most lenders demand to know what other loans the borrowers have outstanding.”
We did this years ago, borrowing a portion of our down payment from my in-laws, less than $10,000. Our mortgage broker told us not to tell the bank that it was a loan, because that would effect our mortgage rate. Instead, we did it as a private loan, wrote a note just between us, which my father-in-law wrote up himself and we all signed. It was not worth worrying about the interest tax deduction because it was a low interest loan (under 3%), it was on a small amount of money, and we weren’t making all that much money to be taxed on (hence the need to borrow for a down payment).