🏠Can You Get A Mortgage While On Maternity Leave?🤰🏽

 In mortgage broker news

While starting or growing a family can be an exciting time, it represents a big change in your life. It can also bring on new challenges such as additional expenses and reduced income. As income is one of the main components of mortgage qualification, many wonder if going on maternity leave will affect their ability to qualify.

While each lender has their own policies surrounding maternity leave, most of them will still consider 100% of your full salary providing that you have a set return to work date within one year.  That means that the maternity leave should have no negative affect on how much you qualify for.

But there are some exceptions.

Some lenders will require you to be returning to work within only two months of closing for them to consider the full salary. In fact, they may only use 65% of the income for qualifying. This is why it’s so important to mention that you’re on maternity leave as soon as you start inquiring about your new mortgage. While there are some rather large mortgage lenders with this policy, the majority of them are much more flexible.

It still may be possible to use the full amount with the return date as far out as 18 months, but the options are more limited. Most lenders will want to cut it back, which can be as little as 35% of the full income. This would be reviewed on a case-by-case basis. 

Do You Have To Disclose That You Are On Maternity Leave?

No, you don’t have to, but it’s in your best interest that you do. A lender is not going to decline you because you’re on maternity leave. That would be not only morally wrong, but illegal. But the lender has every right to ask questions about your current employment status as they will want to be reasonably certain that your work is expected to continue.

Employed individuals will need to provide a recent pay stub, and if you’re on maternity leave, then it’s not likely that you’ll have one. The lender would then have this obvious question:  

Why?

As mentioned, a lender cannot turn you down because you’re on maternity leave. They can, however, turn you down if you’re on leave for non-maternal reasons.

They’ll want to see that you have a set return to work date, which should be clearly stated in your letter of employment.  If you do not have a date set, then the lender has no reason to believe that your work is expected to continue.  For this reason, it’s not likely that they will consider your income, which is well within their rights. This has nothing to do with you being on maternity leave. It has to do with the uncertainty of your employment.

How Does Maternity Leave Affect Self-Employed Or Non-Guaranteed Income?

If your self-employed, paid commission, overtime, bonus, or any other form of income that is not guaranteed, then it the maternity leave will not have an impact on your mortgage approval. 

The standard non-guaranteed income requirements apply.

Last two years T4s for those with bonus, commission or overtime pay.

Self-employed individuals will need to provide their last two years T1 Generals (tax returns) and Notice of Assessments (NOAs).

Where it can be more of an issue is if the maternity leave has passed which has resulted in a lower average income over the last two years. In this case, there are some lenders who may consider looking at the past three years. If the useable income is still falling short, then there may be options to use earnings from the last six months, however it’s generally only B lenders who would consider it, which would mean higher rates, as well as a lender fee.

Conclusion

Maternity leave can be a wonderful time for many. It not only gives you a break from work, but it allows you to spend your time getting to know the newest member of your family. Mortgage lenders understand this, which is why maternity leave would rarely have an impact on qualifying for a mortgage. As long as you’re returning to your job within a reasonable time frame, then you don’t need to worry it impacting your ability to qualify for a new mortgage.

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