Like to buy parents home and remodel

[Chris C.]

I'll try to keep it short. Wife and I are interested in buying her mom's home. We currently own a town home, have a young family, and have been gearing up to start looking for something larger. 

Mom wants to sell it for "what she owes on it". It needs a top down complete remodel. New bathrooms, kitchen, carpet, replace hardwood floors, new deck, and maybe knock down a wall or two if we can. We also want to turn the unfinished basement into an apartment for her with kitchenette and bathroom (new).

She owes around 300K on it and the Zillow on it is around 400K. 

Looking for advice on the best lending route here if we want to do this. I know all about the HomeStyle loans, but not really sure on the puzzle of buying a home below market (if in fact we should even do that).  Slightly complicating matters is also selling our existing home. We owe around 320K and the zillow on it is around 420K. We have excellent credit in the mid 700's and can afford (on paper haha) to hold two mortgages if we need to for a short time.  I do like the idea of her mother using gift equity for our down payment on the new home loan, if i understand that correctly.