Receiving Inheritance--- Will our current FICO score affect our ability to get a large mortgage

[Anonymous]

My wife and I currently have a FICO score of 557 mainly because of some medical bills she's been slow to pay. However, her father, a multimillionaire, died last December and left her and her brother a large trust fund. We're being told it may take as long as 2 years for his assets to be appraised and the IRS to approve the trust during which time nothing can be paid out.

She would like to buy a rather nice house when she begins receiving her share (part will be lump-sum and part will be paid to her monthly). With sub-prime loans a thing of the past, how concerned should we be regarding our current FICO score and paying down the overdue balances we currently owe? If we wait and pay them in their entirety when she begins receiving her inheritance and place a 20%+ down payment will the mortgage firm disregard our delinquencies? We're currently on a fixed monthly income and any money we pay now will impact our current living standard so we would prefer to wait unless it may prevent our getting a 15 year mortgage.

[JM-AM]

The first insight will be... You will not qualify for a mortgage where your scores are at presently. You could purchase the home with cash when you receive your trust which in my opinion is what would be best but......

Reason I say what would be best in my opinion is because it will take time to rebuild your credit. You would also have to either pay off your medical bills and or have them removed from your credit report. Paying them off and keeping a clean report for a minimum of 12 months and rebuild your credit history is an option, but since you are on a fixed income it is probably not reasonable.

Here is the catch with paying cash for your home. If you owe money to medical bills or any creditor with-in the SOL of your state you have the possibility of being sued and losing your home. So in reality you would have to pay cash for your home and pay off all outstanding debt that is with-in SOL. If you live in a community property state you would also have to pay off any debt you owe with-in SOL.

There really is no quick answer to help your scenario, you both would have to sit down and figure out what is best for you. There are many different things to consider when purchasing a home. Owning a home is an expense and at times needs upkeep.

Wish you all the best in your decision

[Anonymous]

That's pretty much what I thought. Now I need to convince my wife that we should forego some unnecessary expenses (dining out,etc.) in order to get our bills paid before she gets her inheritance. She was thinking we could postpone paying them until just before buying a house.

Thanks very much for your feedback.

[onceuponan803]

Geez, you're luckier than most.  

Pay those back bills off, shed the old baggage  and skip stress free to your new future.  So what if you miss a few dinners out? 

[StartingOver10]

Also, you probably want to speak to an attorney about asset protection. You might consider putting your new home (when you get it) into a trust. There are a lot of reasons for asset protection, but your situation is ripe for creditors running in and placing a lien against your home (with or without your knowledge). The best solution is to take care of the outstanding issues AND protect all future assets. A good attorney that specializes in asset protection would be a tremendous help.

[Anonymous]

Thanks. I understand and appreciate your advice.