Yes, you can apply for a mortgage but you have to understand that it won’t be considered an “arms-length” transaction; defined as an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other.
For this reason, you may find yourself with some special requirements such as a second appraisal or a closer look at your source of funds for the down payment. For example, your relatives will not be able to provide the funds for the down payment or closing costs. They are also going to look closely at the asset as to the status of any existing financing. If it’s in trouble and this looks like a bailout, you could have additional issues. As I said, it can be done, but it’s likely going to be a bit harder.
As long as everyone and everything is completely above board and you communicate with the loan officer and processor, you should be able to put it together. That said, do expect the lender to do an occupancy check within the first 12 months to see that you have actually moved in unless you’re applying for the mortgage to use the house as a rental.
Hope this helps.