Is this considered mortgage fraud?

[Jim Stevenson]

If I take a gift from a friend to cover the entire 20% down payment for an investment property, can I then pay that friend back with a personal loan? Would that be considered mortgage fraud? Can a non-family member even contribute gift funds for a down payment?

[Chris Mason]

Originally posted by @Jim Stevenson:

If I take a gift from a friend to cover the entire 20% down payment for an investment property, can I then pay that friend back with a personal loan? Would that be considered mortgage fraud? Can a non-family member even contribute gift funds for a down payment?

 Unsecured borrowed funds cannot be used for down payment or cash to close. If there is an expectation of repayment, it is by definition not a gift.