The Quick Read: A conventional loan can fund a buyout of your co-heirs, but it cannot force a reluctant heir to sell. Fannie Mae and Freddie Mac both require every party to sign a written buyout agreement. If the other heirs agree to sell you their shares, a conventional refinance can pay them. If they refuse, your options are negotiation or a court action called partition, and the loan comes after that.
Does a Refusing Heir Block the Loan?
A refusing heir blocks the loan in one specific way: the loan cannot force anyone’s hand. Nothing in the agency rules lets a mortgage compel a co-owner to sign over an interest. A holdout can only be moved by negotiation, mediation, or a court.
“Won’t sell” can mean two different things. One heir may refuse to sell the house. Another may refuse to sell you their share. The first is a dispute about the property. The second is a dispute about price. Price disputes are the easier kind to solve, because an appraisal gives everyone a neutral number.
Across the wholesale programs Lendmire arranges, the pattern is consistent. Files that stall rarely stall on credit. They stall because a signature is missing, the deed is still in the decedent’s name, or the family has not agreed on a price. Fix those three and the loan itself is routine.
This is a legal question as much as a lending one. A probate or real-estate attorney in your state should guide the court side.
How Does a Conventional Loan Fund an Heir Buyout?
A conventional buyout runs as a refinance in which you pay the other heirs for their equity. Fannie Mae calls it a limited cash-out refinance. Freddie Mac calls it a special purpose cash-out refinance. Both exist so one co-owner can buy out the rest.
Under Fannie Mae’s limited cash-out rules, the buyout needs four things:
- All parties sign a written agreement stating the transfer terms and where the proceeds go.
- The keeping heir receives no proceeds.
- The keeping heir qualifies for the mortgage on their own.
- The co-owners have held the property jointly for at least 12 months, with an exception for a recent inheritance.
Fannie Mae’s heirs’ property page confirms that proceeds can buy out one or more co-owners and that the 12-month rule does not apply to recent heirs.
Freddie Mac limits the loan amount to what buys out the co-owner’s equity. It also asks for a written agreement signed by all parties and 12 months of joint ownership before application. Confirm Freddie’s treatment of heirs with your loan officer before you plan around it.
In practice, the leverage works like this. A limited cash-out refinance on a one-unit primary residence can reach 97% LTV on a fixed rate under Fannie Mae’s matrix, or 95% on an adjustable. LTV, or loan-to-value, is the loan balance divided by the home’s appraised value. Within Lendmire’s program set, rate-and-term refinances on a one-unit principal residence run to 95%, and to 97% where the existing loan is agency-owned and the first-time-buyer program allows. Mortgage insurance applies above 80%. All figures are subject to lender guidelines and full file review.
How Is the Loan Underwritten, Step by Step?
Underwriting starts with title and ends with payouts. Each step has a point where a holdout can stop the file.
1. Confirm who is on title. The keeping heir must be on the deed. A deed still in the decedent’s name with probate open means no loan. Exceptions exist for inheritance and legal awards, but the lender needs to document them.
2. Collect signatures on a buyout agreement. Every party signs. It states the terms of the transfer and who receives the money.
3. Pick the loan type. An agreed buyout with no cash to you uses the limited cash-out route. If you also want cash for other uses, that is a standard cash-out with a lower leverage cap.
4. Order the appraisal. The appraised value sets your maximum loan. It also gives the family a neutral number for pricing each share. Freddie Mac requires a new appraisal on a cash-out.
5. Underwrite the keeping heir. You qualify on your own income, credit, and reserves. The inheritance is not income. Wholesale conventional programs generally start at a 620 decision score, and the automated finding governs most files, with a 50% total ratio ceiling.
6. Pay off existing liens. If the home carries a mortgage, the 12-month note-age rule can apply. Fannie Mae excepts a co-owner buyout under a legal agreement.
7. Close. The other heirs sign deeds or quitclaims, and funds flow to them through closing.
What decides the outcome: every co-owner’s signature, clean title, your own qualification, and whether the appraised value supports the price you agreed on.
What If You Want Cash Too?
A standard cash-out is a separate loan with tighter limits. On a one-unit principal residence, conventional cash-out tops out at 80% LTV. On two- to four-unit principal residences it is 75%. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Fannie Mae’s cash-out rules add seasoning tests. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. Inheritance and legal awards are recognized exceptions to the title wait. Fannie’s older text states the inheritance exception plainly, but treat that archived 2020 version as background only and rely on the current page for exact wording.
One surprise: a paid-off inherited home is still treated as a cash-out. No existing mortgage does not make it a rate-and-term loan.
Inherited homes also do not escape the cash-out cap. Taking cash for repairs or debts on top of a buyout means the combined structure must fit under that 80% ceiling, so it rarely works to bundle both in one loan.
If your goal is to keep the home and pull equity for something else, Lendmire’s cash-out refinance programs show how each structure reaches your equity.
When Does the General Rule Break?
Most of the rules above flex at the edges. These are the named exceptions to know.
Recent inheritance versus long co-ownership. Fannie Mae excuses a recent inheritance from the 12-month joint-ownership proof. Freddie Mac’s special purpose test uses 12 months of joint ownership, and an inheritance exception is not clearly shown in its text. Same family, different answer depending on the agency.
Occupancy. For a primary-residence cash-out, Freddie Mac requires all borrowers to occupy the property. Occupancy treatment in a buyout differs between the agencies. Ask your loan officer which applies to your file before you commit to a path.
No cash to the keeper. Both agencies bar proceeds to the heir keeping the home in a buyout. Limited cash-out allows only incidental cash back.
Tangled title. When heirs lack clear legal title, qualifying gets hard. Freddie Mac notes that such heirs often struggle to qualify for resources like home equity loans. Clearing title comes before any lending conversation.
LLC title. If the home sits in an LLC, the title generally must move into individual names to close on a consumer loan.
Appraisal gap. If the appraisal comes in low, the LTV cap shrinks the loan. The price you agreed with the other heirs may no longer fit, and you may need to bring cash.
Occupying heir. Disputes over who lives there, pays taxes, or covers repairs change what each share is worth. Settle credits and offsets in the buyout agreement, not afterward.
What Are the Routes When an Heir Refuses?
You have four, and they often run in sequence.
| Route | What it does | Main risk |
|---|---|---|
| Negotiated buyout | Heirs sell you their shares by agreement | Price dispute |
| Mediation | Neutral third party helps settle price | Needs everyone to show up |
| Partition | Court orders a sale or a split | Cost, state-specific rules |
| Keep co-owning | No loan, no buyout | Disputes continue |
Partition is the legal tool that overrides a refusing co-owner. Many states have adopted the Uniform Partition of Heirs Property Act. As Greenleaf Trust summarizes it, the Act requires notice, an appraisal, and a right of first refusal, and a court supervises any sale that still has to happen. That right of first refusal can help you: you may get the chance to buy the requesting heir’s interest. State rules vary, so ask an attorney how your state handles it.
Sequencing matters. A partition filing does not stop you from applying for a conventional loan, but the lender needs a signed agreement or a court-supervised transfer before the buyout can close. Many families try negotiation first, use the appraisal to anchor price, and treat partition as the fallback.
How Do You Price a Buyout?
Start with the appraised value. Subtract any mortgage or liens on the home. The remainder is the equity. Each heir’s share is their ownership percentage of that equity, adjusted for agreed credits.
Credits and offsets are where families fight. Common ones include taxes and repairs one heir paid, rent paid or owed by an occupant, and liens or unpaid taxes. Write each into the agreement. A lender and title company will want the final numbers on paper.
Think of the simple version in words: three heirs own equal thirds, and you want to keep the house. You pay the other two a third each of the equity, less whatever credits they agreed to. Your loan must cover that total and fit under the LTV cap at the appraised value.
The decision you face: does your qualifying income support a loan that big on your own? The inheritance does not help you qualify. If the answer is no, a smaller buyout, a co-borrower, or selling may be the honest outcome. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Heirs’ property: a home passed down without clear legal title, often shared by many relatives.
Partition: a court action that divides co-owned property or orders it sold when owners disagree.
Limited cash-out refinance: a refinance that pays off the existing loan and closing costs, with only incidental cash back. It is also the structure used for a buyout.
Cash-out refinance: a new mortgage larger than the old one, with the difference paid to the borrower.
Seasoning: a waiting period tied to how long you have owned the home or held the loan.
Quitclaim deed: a deed that transfers whatever interest the signer holds, without promises about the title.
What Should You Do First?
Pull the deed and confirm who holds title. Then get an appraisal, so every conversation uses the same number. Talk to an attorney if any heir is silent or hostile. Only then ask a loan officer to check your own qualification.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. If the balance you need would run above the conforming limit, Lendmire’s article Can One Heir Get a Jumbo Cash-Out if Co-Heirs Will Not Sell? covers that lane. Every program figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Frequently Asked Questions
Can I force the other heirs to sell if I want to keep the house?
No. You cannot force a sale of their shares through a mortgage. You can offer a buyout at appraised value, try mediation, or, as a last resort, work through a court partition. A court process may give you a right of first refusal under state law.
Does inheriting the home waive all the seasoning rules?
Only some. Inheritance generally waives the six-month title wait on a cash-out. It does not erase the 12-month rule on an existing mortgage being paid off, although Fannie Mae excepts a co-owner buyout under a legal agreement. Your loan officer can confirm which test applies.
Can I take extra cash out when I buy out the heirs?
Not in the buyout itself. The keeping heir receives no proceeds, and Freddie Mac limits the loan to the buyout amount. Extra cash needs a separate standard cash-out, which carries the 80% LTV cap on a one-unit primary residence. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Does the inheritance count as my income?
No. You qualify on your own income, credit, and reserves. Programs commonly start at a 620 score, and the automated finding sets most decisions.
What if the appraisal comes in below the price we agreed on?
The LTV cap shrinks the maximum loan, so the agreed price may no longer fit. You can bring cash, renegotiate with the other heirs, or restructure the deal.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
2. Fannie Mae, Addressing heirs’ property
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Freddie Mac, Understanding heirs’ property
5. Greenleaf Trust, The Uniform Partition of Heirs Property Act
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Conventional Cash-Out Requirements When One Unit Is Vacant · How to Prepare for an Electronically Verified Conventional Cash-Out · Can You Get a Conventional Cash-Out on a Duplex You Live In?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.