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My husband and I are in the process of applying for our first mortgage. I recently inherited a property worth $800,000. However, my elderly stepmother was given a life estate in this property and is currently living there. We are in discussions to sell it, in which case I would get a certain percentage based on her age as the life tenant, but until/unless we do that, she has the right to live there until her death, as which time I would receive 100% ownership.
Is this something I can list as an asset on our mortage application? I don't own it outright, but I do have an ownership interest and have a right to sell my part at any time. I didn't know if such an interest would be considered an asset or not for mortage purposes. I don't want to make a mistake. Thank you.
It is not an asset but part of the Real Estate Owned(REO) section. Assets for mortgage purposes)are liquid or semi liquid accounts that you would use to pay bills in the event of a job/ income loss- checking, savings, money market, investments, IRA, 401k etc.
I think that the OP needs to check the details of what exactly they inherited . In my experience when a situation comes up where a surviving spouse is given a life estate there are trustees involved and the other benefactors named in the will do not title transfered to them, thus the home would not be considered an asset.
If the OP does have the title the property it WOULD be considered an asset. The same would be true of any real property -- cars, boats, etc. There is truly no reason to believe that non-liquid assets are not important to the lending decision. In fact for most mortgages that I have taken out were granted largely becuase of my other real estate holdings and the assets they represented.
The specifics of a "life estate" genereally DO NOT provide for the "remainderman" to receive only a portion of the property if it should be sold before the death of the surviving spouse, such an action may be an improper attempt to diminish the value which would pass on to the OP. Might want to make sure that stepmom is not violating the terms of the estate...
BTW I further believe the OP cannot really sell their supposed interest in the property before the death of their stepmom, as the complications of both the will that probably created the life estate and any restrictions that were placed on the title of the property would need to be approved by the trust administrator, something no buyer would be eager to face. Better get clarification on that from the executor of the will and also a disinterested attorney.
If either of the situations described (step mom only giving you a portion of the proceeds or you attempting to sell your interest) is not legitimate there is the potential to commit a kind of theft, and other parties to the will could bring a criminal complaint as well civil suits against either of you...
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