Family Loan to Purchase Real Estate

[Brandon Bell]

We found a house we want to purchase. My parents want to help us pay for it and we pay them back on interest. What is the simplest way to do this? Here is what is being considered:

SCENARIO 1):

1) Parents loan us money at X% rate.
2) Loan terms would allow for early payment without penalty (we would get a conventional loan in 2-5 years to pay parents back). 

Q1) Is there a minimum interest rate requirement?
Q2) Would there be an issue with this?
Q3) If it's a loan from our parents that we are paying off, who holds the title to the home?

SCENARIO 2):

1) Parents buy the home and we live in it.

Q1) Is there a way to make this work? Rent-to-own, or something? Ultimately after 2 years we would be able to get a conventional loan and pay them back. Their assistance will help us buy the house now.