Getting a Duplex with a gift as downpayment, best way to proceed?

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Hi,

I'm in a situation and I'm not sure the best way forward:

A family member owns a duplex that they want to sell. They want to gift the down payment to my wife and I to help us out which is very generous. What's the best way to proceed?
Here are the numbers: $125,000 cost, gift of $25,000 to us to make the down payment.

What's the best way to proceed?

1) Get a conventional loan, fill out a gifted money form and purchase for $125,000 with 20% down.

2) Somehow transfer the title, and then get a mortgage on it for $100,000 that I could pay to the family member.

3) Some other way that is a typical solution to this kind of problem.