February 3, 2014
A reader asks, “What happens if your parent co-borrows the loan with you, and they pass away at some point before the loan is paid off?”
This is a fairly open-ended question and the answer is just as subject to interpretation because there’s no single law or regulation that applies in such cases. The first place a borrower should look for answers in such cases is the language of the FHA loan contract–what does the contract specify if such a contingency is mentioned?
FHA loan rule policies are not the first place to start looking in this case for one simple reason–state law will definitely have something to say about some part of the process. Does the borrower have inheritance issues to deal with in addition to the FHA loan itself? How does the added responsibility of losing a co-borrower in this case affect the borrower legally under state law?
Real estate and property laws in each state may differ when it comes to the disposal of an estate, execution of living wills, last wills and testaments, etc. There are far too many scenarios where a different law may apply.
The answer to this particular reader question depends on a great many variables. Did the co-borrower include instructions about the FHA home loan in his or her will? Is there a legal procedure or precedent in place that may affect how this situation is handled? What if the co-borrower specifies his or her interest in the property should be passed on to another?
All valid questions. Borrowers who find themselves facing this situation would do well to get legal advice from a qualified expert, and those who want to make things simpler should the worst happen with a co-borrower should consider consulting a lawyer about legal wills and other provisions before they are needed.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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