Is this mortgage fraud?

[Jena Richards]

I have a family member willing to give me some inheritance money early to continue investing.

I know the rules involving no gift money for investment property down payments. We have enough money for the down payment itself, however that completely exhausts our HELOC.

My questions: are gift funds ok for the 6 months cash reserves?

And

If my family member instead of giving me just cash, made a large payment directly into my heloc to pay it down, would that still be considered gift funds as a down payment / cash reserves? Or do they not look at where those payments are coming from ?

The first investment property we bought, we were preapproved without having either the down payment or reserves in our bank account. Once the actual loan app started, we were asked to deposit them, which we did from our heloc. Just curious as to how banks look at it.

Please note, I’m not trying to skirt the system, I’m asking so that I don’t do anything to either kill a potential deal or get in trouble :-)