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ANSWERS: 1
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Legally, they are allowed to make a mortgage loan to you. If this will be the only mortgage loan on the house, there should be no difficulty, although I would strongly suggest that they follow the proper channels. (Have a written mortgage document, specify terms and conditions, specify security interest in the property, specify interest rate, register the loan.) If the loan would be in addition to another mortgage to be held on the property, you should check with the other lender prior to obtaining a mortgage from your parents. Most lenders will not write a mortgage for you on a property that already has a mortgage on it. (It messes with their right to take possession of the property should you default on the loan.) If you take a loan from your parents and fail to disclose it to a subsequent mortgage holder, you would at least be in violation of the terms of the subsequent mortgage, and depending on what state you live in, may also be in violation of the law.
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