You can receive down payment monies in form of a gift from a friend or family member.

Are there gift options for buying the Long-Distance Real Estate Investing Book by @David Greene here on Bigger Pockets?

We ended up getting part of the money gifted to us before closing, we told the bank this and before we closed they essentially gave us a number of what had to be in the account for us to close.With the extent of work required the bank rolled 6months of mortgage payments into the loan.

For the 3.5% down payment, you'd still need that money, which best case scenario, you can have a family member provide you a gift amount.

-assets - down payment funds and reserves which can be your funds and in some cases gifts as well- credit - min fico is 580-620 but for best pricing you’ll want to be in the 680 or higher range

Joking aside, someday I want to gift my children real estate.

That can be money if allowed, gift certificates etc.

I'm considering acting as the bank and lending to a sibling who is buying a house.1) Is the interest I receive taxable as interest income, or can it be considered gifts between family members?

You would need gift funds from family/friends or have someone who has the downpayment to sign with you.

Rich family members could give you a gift.