When a borrower inherits real estate, financing that property carries extra title and ownership requirements that a standard purchase does not. Probate status, how title is vested, and whether the estate is settled all affect what a lender will accept and when they will fund.
Probate and Title Vesting
The lender needs clean title before committing. If the estate has not cleared probate, the property cannot close on a conventional or agency loan. The borrower must be on title as an individual or as a trust beneficiary, not as the estate of. Once title is out of probate and vested in the borrower's name, normal underwriting applies.
Occupancy and Loan Type
If the borrower intends to occupy the inherited home as a primary residence, FHA, VA (if eligible), and conventional financing are all available after title is settled. For a borrower taking an inherited home as a second property or rental, conventional and DSCR programs apply. FHA requires owner occupancy and does not allow FHA on a property the borrower will not live in.
Inherited Property Cash-Out and LTV
On a conventional cash-out refinance of an inherited property, Fannie Mae treats it as a special-purpose cash-out if title has been held less than 12 months. The maximum LTV is 70% for investment properties in this scenario. For primary residences, if the borrower has owned the property at least six months, standard cash-out LTV limits apply. Some lenders will go to 80% LTV on an inherited primary residence cash-out even with shorter seasoning via portfolio or non-QM programs.
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