Taking Over Your Parents' Mortgage? Here Are 3 Tips

Taking over your parents’ mortgage can benefit your finances by allowing you to own a house using less time and money, while also paying off their recurring debts.

If you’re thinking of being transferred an “assumable” mortgage loan from your parents, you’re going to have to make sure that the mortgage itself qualifies. Also, you’re going to need to know if you qualify given your financial history. Considering both personal finances and how much house you can afford will be the first steps to navigating your future mortgage plans.

Here are three tips covering taking over your parents’ mortgage.

Recognize The Type Of Loan The Mortgage Falls Under

Looking over the loan documents from your parent's mortgage will help you clarify whether or not the mortgage can be assumable. Conventional loans cannot be assumed because the loan must be backed (FHA loan) or insured (VA loan) by a government entity.

If your parents’ mortgage falls under either of these categories, you’re in the clear. However, you’ll need to see if the bank believes you're eligible to receive the loan. And how do they do that? By checking your financial history.

Check Your Financial History

Before you’ll be able to take over the mortgage, you’ll need to check on your credit score and consent to have a credit check. You can check your score using programs such as Equifax EFX or TransUnion TRU.

Also, you’ll need to prove yourself with other documents. When starting the assumption process, the lender may ask you to fill out an application and submit forms such as past pay stubs, W-2 forms and bank statements.

Double-Check The Origin Date Of The Mortgage

The origin date of the mortgage helps determine whether or not you will need to redeem yourself via your credit score, bank statements, etc.

Under the HUD Reform Act of 1989, all FHA loans are assumable if they were signed before Dec. 15, 1989. You may only need to sign a form. However, loans created after this date may need other actions taken for it to be assumed - such as the application mentioned above.

Check the initial date for the loan, and it may save you a lot of time in the process of taking over your parents’ mortgage.