Maternity Leave: How You Can Get a Loan Before or After Having a Baby
As a new parent, you have a right to maternity leave. But if you are hoping to purchase a house with a mortgage loan in the near future, the upcoming (or current) maternity leave can create problems for your application.
Fortunately, there are ways to qualify for a loan even if you are, or expect to be, on maternity leave. Working with the right lending agent, you can use your regular income, temporary leave income, or even your saving, to qualify for mortgage financing.
Temporary leave from work tends to relatively be short in duration. Usually lasting as much as 12 weeks, although it can be shorter if the parent is motivated to return, this type of temporary leave does not need to disrupt your chances of securing a top-quality mortgage for the purchase of a wonderful home.
As long as a lender is made aware that you may be on temporary maternity leave at the time of the closing, you can proceed with a mortgage. If the income is needed for qualification, there are ways to determine the allowable income and confirm your employment status.
Requirements for Employment When Using Temporary Leave
Meet Standard Eligibility
First and foremost, your employment and income history have to meet the standard eligibility requirements. These requirements will include a variety of factors, and can include employment and other sources of income. Talk with your lending agent to see if you meet the standard eligibility.
Next, you will have to provide confirmation of your intent to return to work after you have taken temporary. This confirmation will need to be provided in a written document and presented to your lending agent.
Specify Date of Return
Once you confirm that you intend to return to the workplace, you’ll need to specify exactly when you expect to go back to work. This documentation will need to come directly from you personally or from the employer. In some cases, a designee of the employer can be used to document the return date. This usually occurs when the employer is using the services of a third-party to administer and manage the employee leave.
Various documents and communications can be used to specify the date of return. Previous messages from the employer that discuss the duration of the leave may be eligible as documentation. A computer printout from an employer, as another example, could be used as long as it discusses the return to work.
Your Right to Return Must be Intact
The lender does not have to actively seek confirmation that you have a right to return to work. (In most cases, you do.) However, there is a requirement that the lender must not have received any information that you do not have the right. Basically, if anything arrives on the lender’s desk that indicates you may not have the right to return, the loan could be called off.
Verbal Verification of Employment
Your lender will also need to obtain a verbal verification of your employment. If you are already on temporary leave, you will be considered employed for the sake of getting your mortgage application qualified for the loan.
Obviously having a job is part of the application, but lenders also need to know the amount of your income. To do so, lenders will verify the amount and duration of the borrower’s temporary leave income, which often requires multiple documents or various source of income depending on the type and duration of your leave.
The lender will also need the amount of regular employment income received before your temporary leave. Regular employment income can include your regular paychecks and other income sources that would qualify under “normal” circumstances. Base pay, commissions, and bonuses would all be applicable.
This verification of income will need to be provided by the borrower, the borrower’s employer, or by a third-party employment verification service.
Requirements for Calculating Income Used for Qualifying
There are different steps for calculating your income depending on whether the borrower will return before the first mortgage payment is due. Understanding each one will help you understand how your income will be calculated for the sake of the application and should help you predict, roughly speaking, the income you can use towards the loan,.
If you will return to work, the process is fairly simple. As long as you will be back to work by the date when the first mortgage payment is due, the lender can consider your full regular employment income when helping you qualify for the loan.
However, if the first payment will be due before you return to work, the process is slightly different. In this case, the lending professional will need to look at two different numbers:
- You temporary maternity leave income, if you have any
- Your regular employment income before maternity leave
Once your lending agent has looked at the two numbers, he or she will use the lesser of the two to get you qualified for the loan.
But this creates a problem. What if you have no temporary leave income? In this case, would it mean you have to qualify for a loan with no income to put forth? Not exactly. If the temporary leave income is less than your regular employment income, the lender can supplement your temporary income with financial reserves such as cash savings. They will have to go through a process to use this money and create an income figure, but it may help you get qualified.
Outstanding Service for Your Mortgage Application
No matter what your current situation, we can help you get approved for a top-quality loan before or during maternity leave. While we can’t guarantee approval, we promise to do everything possible to increase your chances of an affordable loan.
Contact Chad Baker and our world-class team today to get the service and support you deserve!