When you sign a contract you are obligated to close on the sale of your home. In this case, if the bank has not yet accepted the contract, you may have a chance to contact them and catch up on the mortgage. If the bank has already accepted the contract, you are obligated to close and can use the inheritance for a downpayment on renting a home until you get back on your feet. If you would still like to try to back out of the sale, contact a lawyer to see what your obtions are.

Not sure, but to be of the safe side add a clause to the contract allowing you to break the contract if "seller is able to obtain funding to bring the current mortgage current". You can even wait to add it during the negotiation process.

Good Luck.