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Getting a home loan on maternity leave
Learn how having a baby can impact your mortgage application and how to apply while you're on maternity leave.
Having a baby and getting a new mortgage — yes, you can do both. Legally, a lender cannot deny you a home loan because of maternity leave. But you’ll need to prove that you can afford to make payments while you’re away from the workforce.
Tips for applying for a mortgage during maternity leave
As with any other applicant, lenders will look at your income, assets and liabilities. You’ll need to demonstrate your financial position while on maternity leave and provide proof that you plan to return to work afterward.
If you’re applying for a home loan while on maternity leave, here are some tips to help you succeed:
- Provide a W-2 tax form. If you’re a salaried employee, your lender may want to see your W-2 tax form for the year prior to when you take your maternity leave.
- Get documentation from your employer. If you’re on paid maternity leave, strengthen your application with a letter from your employer outlining the terms of your maternity leave, including:
- Your return date
- Future employment terms
- Salary upon return
- Set a realistic budget and loan amount. Consider your income and expenses carefully to make sure you’re borrowing an affordable amount. The costs of having a child will impact your budget, and you need to have enough set aside for unplanned expenses.
- Shop around for a mortgage. Shop around and compare lenders to find a company that’s easy to work with and can help you find the best deal.
- Consider talking to a mortgage broker. A mortgage broker should have a good sense of which lenders will accept your application and can guide you through the whole process.
If possible, try to apply for a home loan before you take maternity leave. That way, you’re not required to provide additional documentation to verify your income and assets during maternity leave.
What will a lender consider when reviewing my application?
Lenders will typically take into account whether you’re on paid or unpaid maternity leave, when you plan on returning to work as well as when you’ll start making loan payments.
- If your loan payments start after maternity leave:
- If you plan on going back to work on the date of or before the first payment, the lender will approve your mortgage based on your pre-maternity leave income amount or your salary upon return, as documented by your employer.
- If your loan payments start during maternity leave:
- If you plan on going back to work after the first payment, the lender will look at your current liquid assets to make sure you can service the loan for the time you’re away from the workforce.
When it comes to getting a mortgage, your income counts. Which is why, according to Fannie Mae guidelines, you must provide your lender with written confirmation of your intention to return to work.
Applying for a home loan before taking maternity leave
If you’re still working when you apply for a home loan, the application process will be easier. While your lender can’t discriminate against you for being pregnant, you’ll need to crunch the numbers yourself and make sure you can repay the loan.
Consider the following:
- Determine how much you’re hoping to borrow and what your monthly payments will be.
- Calculate your temporary income (e.g., maternity leave pay), liquid assets, cash on hand and expenses.
- Add on any new expenses the baby will bring, from big ticket items like medical care and daily items like diapers.
- Make sure you can afford to make payments in this scenario and cover any unexpected expenses without impacting your budget.
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If you’re going home loan shopping, compare multiple lenders to find the best mortgage and rates. Since every lender has different guidelines, talk to several loan officers and find one that has experience helping borrowers navigate the mortgage application process while on maternity leave.
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