Assuming a Mortgage After a Home Inheritance: Navigating Credit Challenges

If your aunt recently inherited a home that she doesn't want, and you're considering assuming the mortgage due to poor credit, there are several important factors to consider. Inheriting a mortgage is not as simple as taking over the payments, and several steps must be followed to ensure both parties are protected.

Understanding Your Options

First and foremost, you cannot assume a mortgage from a deceased homeowner through inheritance. You must apply for a new mortgage on your own terms. This is important to understand because assuming the mortgage you are currently discussing is not legally binding and may not be in your favor.

Qualification Process

To secure a new mortgage, you will need to qualify for it based on your financial situation. If your credit score is poor, it will be a significant challenge, but not an impossible one. It is crucial to evaluate your ability to maintain the payments and the overall financial impact on your credit score.

Alternatives to Assuming the Mortgage

If you cannot qualify for a mortgage due to poor credit, there are alternative options that may work better for both parties. One such option is a lease/option agreement, where you can lease the property with the option to purchase it at a future time. This allows your aunt to continue owning the property without triggering the 'due on sale' clause, and you can contribute to the overall equity over time.

Lease/Option Agreement

In a lease/option agreement, you can negotiate the purchase price to be the declining mortgage balance. This means that you make payments that cover the mortgage balance, taxes, and insurance, which is a win-win for both parties. You can also work on improving your credit score through timely payments and maintaining the property, which will make it easier to qualify for a mortgage in the future.

Co-Signing Possibility

Another option is for your aunt to co-sign for you. If she is willing to do so, it can significantly improve your chances of securing a mortgage. However, if co-signing is not an option, consider reaching out to other family members or friends who might be willing to co-sign for you.

Consulting the Lender

The final step is to consult directly with the lender. Banks and mortgage companies have the final say in their policies and may offer solutions that others cannot. Contact the bank and discuss your situation. There may be specific terms or conditions that you can work out that are favorable to both parties.

Financial Agreement

Regardless of the path you choose, a formal agreement should be in place. This agreement should outline the terms of the lease or mortgage, including the amount of rent you will pay, how much of that rent goes towards principal, and when and how you will buy the property if you decide to do so.

To ensure the protection of both parties, you should have a written agreement that clearly defines the terms of the lease or option. This agreement should also include provisions for maintenance, repairs, and any other responsibilities you have as a tenant or potential buyer.

Conclusion

Assuming a mortgage on a home inherited by your aunt can be a complex process, especially if you have poor credit. By understanding your options, exploring alternative solutions, and working directly with the lender, you can find a solution that is fair and beneficial for both you and your aunt. Always consult with a financial advisor to ensure you make the best decision for your financial future.