Source: Bankrate —
For many families, buying a home and having a baby are two big dreams on life’s to-do list. But what if you want to realize those dreams simultaneously? If you’re pregnant or a new mom trying to qualify for a mortgage, there’s a chance going on maternity leave could keep you from getting approved for a loan or purchasing a home. Taking paternity leave (or any other type of leave, for that matter) can also affect whether or not you’ll be able to buy.
The operative word is “can.” “Being on maternity leave can create issues, but it doesn’t have to,” says Casey Fleming, a Silicon Valley-based mortgage advisor and author of “The Loan Guide: How to Get the Best Possible Mortgage.” To ensure a seamless process, it behooves you to know your rights and understand your lender’s concerns.
How does maternity leave impact the mortgage process?
When you apply for a mortgage or home loan, mortgage lenders consider two important factors to determine if you qualify: the likelihood that you’ll repay your loan as agreed (also known as creditworthiness) and your ability to make your mortgage payments (also known as capacity). While creditworthiness is determined based on your credit score, capacity is largely measured by your income and job status.
Even if your credit is great and your income is sufficient to qualify for the loan, there’s one more catch: A lender isn’t going to take your word for it when it comes to where you work and how much money you earn. For most types of loans, your employment status and income must be verified by your employer.
“All lenders are required to determine (and document) that the income they use to qualify you for the loan is stable, predictable and likely to continue,” Fleming explains. “This means as long as your employer is willing to verify in writing that you will be able to resume your previous position (or a similar one at similar or higher pay) as soon as your maternity leave is over, most lenders will approve and close the loan.”
Going on paid paternity or maternity leave can actually make things easier when it comes to getting a mortgage. If your income level won’t change — or, at least, won’t take a huge dip — you’ll still have continuous cash flow. That means you won’t have to put your homebuying dreams on hold because you or your partner isn’t working.
Your employer doesn’t have to necessarily be the one cutting the checks, either. While the leave many employees are guaranteed under the Family and Medical Leave Act (FMLA) doesn’t include compensation, some states do have paid family leave programs. If you live in one of those states, getting a mortgage may be easier because your lender will know you’ll have at least some income to help with your home loan payments while on leave.
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