Luckily I had a friend gift me the money (as a loan), which the lender had no problems with.

@Judah Hoover thanks, the hat was a gift!

Gift funds are allowed, but they have to be from somebody that doesn't have a direct financial interest in the transaction.

Some may allow you to re-fi after 6 months of seller financing, others may allow you to get a new mortgage and count the current equity as a 'gift.'

Along the same lines:Why should my nephew with 4 kids get a $1,000 per child tax gift?

I have some private lenders who are willing to put up the $$$$, and the refinancing plan.But in need to know how the transfer of funds would work, and the simplest way to execute he deal.One challenge I expect is that if I am "gifted" 'money like this, some lenders want to see it be in my account for 60 days before they will allow me to use it for downpayment.Thoughts?

All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved.

Well, if they "purchased" the house, with no gift tax filing for any "difference in a higher Actual value" then their basis likely is what they paid for it, and an appraisal is irrelevant.....an appraisal would Only come into play if they inherited it.   

Gift income?

If your mother's property will appraise significantly higher than the loan balance, then by letting you take the property subject to the existing mortgage, your mother will be giving you a gift of equity.