If there is ever a time you not only need, but want a home of your own, it’s when a baby is on the way. However, a common fear many buyers have, including myself, is the financial differences being on maternity leave poses when applying for a mortgage. Your spouse’s income alone may not qualify for a home mortgage, or if your spouse has bad credit, you may not qualify without the income from your employment.
In my case it was a credit issue. I had great credit, but my husband didn’t. My husband had the income to support the loan, but because I was on unpaid maternity leave, I thought that I didn’t. I thought my dreams of home ownership were unobtainable until my baby was born and my pocket book rejoined the work-force. Many people told us we wouldn’t be able to obtain a mortgage loan at the time, and I thought they were right.
I was wrong.
I began researching my options; co-signers, high-risk lenders, and a regular old mortgage loan. What? Turns out that while on maternity leave you can qualify for a mortgage.
So what’s the deal with applying for a mortgage while on maternity leave?
I wrote, called, and spoke to a vast majority of the wonderful lenders and mortgage brokers in my area. I was determined to be free of my rent shackles and on my way to home ownership by the time my second child was born. I found that some lenders will allow you to use your income prior to your maternity leave as income to qualify for a mortgage loan. You, however, must be able to show proof from your employer of your intended return date and salary upon return. It also depends strongly on the lender how the loan will go.
Some lenders will allow you to use your full salary before the leave. Others will base it on your paid maternity leave salary or a reduced rate if you are not receiving maternity leave pay. Some lenders won’t allow this with an unpaid maternity leave at all. However, with a maternity leave contract it is illegal for a lender to deny your application based on the fact that you are on maternity leave alone as it’s considered discrimination. In all cases, a maternity leave contract is required for the underwriter to accept this form of income.
The best way to acquire a mortgage loan while on maternity leave is to talk to a mortgage lender. They will be able to help you compile the necessary documents for a mortgage loan while on maternity leave as well as locate lenders who are more flexible to this option.
What things should you consider when applying for a mortgage while on maternity leave?
Although many lenders, as stated, will allow you to qualify for a mortgage loan based on your income before your maternity leave from work, it’s important you really evaluate your own finances. Can you really afford a mortgage? Nobody wanted a home more than I did, but I forced myself to stop, calculate, and be sure that we could afford a mortgage without my full-time income. I can tell you from experience having a child is expensive, and on top of that stressful. The life of another is being placed in your care. Wondering whether you can make your mortgage payment or not is not a stress you want to add to new parenthood.
Overall what I gathered from my maternity mortgage loan fact-finding adventure was to never give up. Never let anyone tell you can’t obtain the things you dream of, especially if a home of your very own to raise your children in is one of those things. With determination, confidence, and knowledge you can achieve anything including getting a mortgage while on maternity leave, just be sure it’s really what’s best for your family at this stage in your development.