Understandably, many parents can't afford to give away their personal savings for a child's down payment without some interest income or guarantee of a pay back. There are several ways for them to lend you funds for the down payment either through a personal note, a second trust deed or through special programs that require them to pledge securities or other assets to the lender.
The terms of a personal note or second trust deed could require monthly or annual payments amortized over a period of time or require interest only with a payoff at the time the home is sold. Another way to tap parents is through special third party lender programs.
Another program is the Merril Lynch's Parent Power home loan. If the person's mother of father opens an account with Merrill Lynch, they can use it as collateral (in place of the down payment) without actually taking the money out of the account. Meanwhile, funds in the account still gain interest and dividends. The program is available with 15 and 30 year fixed rate mortgages. For more information on the program, contact a local Merrill Lynch consultant or call 1-800-854-7154 ext. 8667.