How to receive investment money from a private lender

[Ben N.]

Discussion Scenario: say I were looking at purchasing a property for $120k and I wanted to take out a loan in my name with 5% down ($6000). Then I go to a private lender (family, friend, referal) to front the 5% down payment with an agreed upon repayment period and ROI. What legalities would need to be documented in receiving that money from the private individual (and then also in returning the money invested with me, along with interest, to the private lender)?

Personally, I have only ever received money in a paycheck with all the legalities and taxes already taken care off.  So I'm completely unfamiliar with what kind of process is required to make such a monetary transaction legally.  (I know the bank will ask for an explanation of any large non-income related deposits into your personal accounts during the period surrounding your mortgage approval process)  Thanks for any tips or guidance on who to talk to or where start!