Here’s the message conservative lenders are sending: Don’t have a baby if you want to qualify for a mortgage.
On maternity leave or paternity leave, it’s common for a family’s income to drop. If income during the leave is classified as disability income, mortgages look at this income as temporary, and they often don’t consider the possibility of the parent on leave return to full-time and full-paid employment.
In this situation, the problem isn’t Fannie Mae or Freddie Mac, the quasi-government agencies that support the mortgage lenders. They haven’t tightened the rules for lending and have no problem with maternity leave. All they require is a doctor’s note and a letter from the employer listing the planned date of return and the full salary. Some lenders won’t consider any income from the individual on family leave.
As a result, it could be difficult for families to qualify for a mortgage at the time they might feel the need it the most — when a new baby is on the way. This is something to keep in mind when planning major life decisions like starting or expanding a family and buying a home.
Updated October 12, 2016 and originally published July 20, 2010.