Getting a mortgage while on maternity leave

Buying a home while on maternity leave is possible, but it might make getting a mortgage slightly more complicated. To ensure a seamless process, make sure you know your rights and understand what documentation you need to provide to your lender.

Can you get a mortgage while on maternity leave?

In short: It is possible to get a mortgage while on maternity leave. It’s also possible to get a mortgage just before or after maternity leave.

If you’re currently on maternity leave, the lender needs to verify your ability to repay, just as it would if you were applying outside of leave time. When you apply for a mortgage, lenders consider the three Cs:

1. Capacity
2. Credit
3. Collateral

Capacity is your ability to repay the loan, largely measured by your income and job status.

You’re not working on maternity leave, however, so rather than verify that you’re currently working, your lender will confirm with your employer that you will return to work in the same or a similarly-paying position after your leave time.

“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,” says Casey Fleming, a Silicon Valley-based mortgage advisor and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “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.”

Most lenders will want a documented return date, as well, says Fleming. Some lenders might require you to prove that you returned to work by providing at least one post-leave pay stub.

If you’re benefiting from short-term disability or paid family leave, that can actually make things easier — these payments show you have at least some cash flow while on leave. Keep a careful record of all communications with your benefits provider and payment statements so you can prove this income to the lender.

If you’re married or in an otherwise committed relationship, your partner might be involved in this process, too. If so, it’s crucial to discuss various scenarios and questions together, such as:

• What if we apply for a joint mortgage? How will this impact how much we can borrow and at what rate?
• How does my partner’s credit and finances compare to my own?
• Will a co-signer, rather than a co-borrower, help me get approved?
• What if I decide I don’t want to return to work?

These considerations can help you arrive at the best strategy to apply for the loan.

What documents do you need to get a mortgage while on maternity leave?

Many documents go into the mortgage application process, even more so if you’re on maternity leave. Here’s what to have on hand:

• Bank statements and pay stubs from at least the 30 days prior to taking maternity leave
• Tax returns, including W-2s, from the past two years
• Most recent investment and retirement account statements
• Most recent loan statements, such as car or student loans
• Short-term disability statements if receiving
• Paid family leave statements if receiving
• Statements for other sources of income, such as child or spousal support
• A letter of explanation detailing your circumstances
• Your employer’s contact information for verification purposes
• A letter from your employer documenting your employment status and wages, including your anticipated return-to-work date
• Down payment gift letter if applicable
• Information on other real estate properties if applicable

Do I have to tell my lender I’m pregnant?

No. You are not obligated to tell your lender if you are pregnant or planning to become pregnant when you apply for a mortgage. Your lender is also not permitted to ask whether you are expecting or trying to start a family — doing so would violate the Equal Credit Opportunity Act.

Similarly, if you are already on maternity leave, your lender is not allowed to operate under the assumption that you will not return to work after your leave ends.

Keep in mind, however, that if your lender calls your employer to confirm income and employment while you’re on maternity leave, your employer is free to disclose that information.

How to report maternity leave housing discrimination

If a mortgage lender requires you to take a few extra steps to prove your income during maternity leave, that’s not necessarily cause for alarm. You should expect any lender to ask for proof of employment and income, since much is riding on your ability to afford your mortgage payments.

Nonetheless, some lenders have crossed the line, even allegedly requiring women on leave to return to work to have their mortgage applications approved, the U.S. Department of Housing and Urban Development (HUD) reports. This is illegal.

“Refusing to approve a mortgage loan or provide refinancing because a woman is pregnant or on maternity leave violates the Fair Housing Act’s prohibitions against sex and familial status discrimination,” according to HUD.

The agency has fined numerous mortgage companies since 2010, including a $5 million settlement with Wells Fargo in 2014 to resolve allegations of discrimination against women on maternity leave.

If you sense a mortgage lender is breaking the law or violating your rights, file a complaint with HUD. The agency will investigate your claim at no cost.

Tips to make the mortgage process easier while on maternity leave

• Shop around. Different mortgage lenders charge different rates and fees, and some might be more experienced working with borrowers with more unique income circumstances.
• Work with a mortgage broker. Rather than dealing directly with a lender, consider engaging a mortgage broker who can shop for loans from different lenders on your behalf. “Some lenders are more conservative than others and less flexible in lending to someone on any sort of leave,” says Fleming.
• Try to time the closing. If you’re really lucky and the timing works out for you, try setting the closing date before you begin maternity leave — or, even better, before you inform your employer that you plan to take leave. (Note that you’ll need to give your employer at least 30 days’ notice to qualify for FMLA coverage.)

FAQ

• How much can you borrow for a home loan when on maternity leave?

  How much mortgage you can borrow on maternity leave depends on your credit and finances as demonstrated in your application. If you don’t have any income coming in on maternity leave, that can impact your approval odds or how much you qualify for.