Advice on buying parents house

[Victoria Britton]

Hello,

We are new here and happy to be part of the community! 
My husband's parents (55+) are moving to another city (Temecula, CA) and are selling their home in Riverside, CA, valued at $915K. We love this house and want to buy it. They are very generous and want to help us with the mortgage. We can only qualify for $415K, so the idea is to "leave" or "keep" $500K in equity and have only a $415K mortgage. The parents would need the funds from the 415k mortgage to fund renovations on their new home, among other things. The Temecula home already closed escrow.

What's the best way to structure the deal so we would own the Riverside house, and we both limit our tax burden? I understand we would need an attorney for concrete answers but are open to initial ideas. I've heard of ideas of "gift of equity," "cash out refinance," and "proposition 19." Ideally the parents want to use prop 19 to move their tax basis to their replacement property (worth 925k). Would we somehow also be able to benefit from preposition 19's parent to child transfer?

Thank you for your help!