What you should know if you entered into written agreement
There may be some state or local government programs in your area that will assist low-income homeowners obtain a mortgage. You should contact your local state representative or senator for additional information. They have been elected by you and should be responsive.
DEAR BENNY: I inherited a house from a friend who passed away six months ago. I have not yet taken title to the property and will not until the estate's trustee finishes settling the estate, which will be in about a month. The mortgage is currently being paid from the interest generated in a CD account.
Once the trustee finishes her duties, the trust provides that the money remaining in this account be used to pay down the mortgage. Once the title is transferred to me, can I take over the home's mortgage until I can get refinancing with a different lender?
I know that if I were a relative, I would have protection, but because I am not, I am worried that the mortgage company will call in the loan.
The loan has a prepayment penalty, which the mortgage company says it will waive for a short period of time (for the paydown), although it has not put this in writing. The prepayment penalty expires in six to seven months and would have been applicable, prior to expiration, even if the house was sold, although there were no stipulations regarding death of the borrower.
Ideally, I'd like to have the paydown and the refinancing happen at the same time; however, I have heard from a lender that my name must be on the title for six months before I can seek to refinance. Any suggestions on how to proceed? --Donna
DEAR DONNA: While state law will differ, my experience is that typically in probate situations, the personal representative is required to pay off all outstanding debts of the deceased, including the mortgage.
However, since you want the house, you will have to pay off the mortgage with your own funds over and above what is available from the trust.
I did not know the answer to your financing question so I discussed it with a friend who is in the mortgage business. He advised me that it is his understanding (perhaps misunderstanding) that the six months refers only to situations where a borrower wants cash out from the financing.
So I recommend that you consider shopping around for another lender who makes it clear that his bank really wants to lend money.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to firstname.lastname@example.org.
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