It’s a typical life event: a couple learns they are expecting a baby, so they begin shopping for a larger home.
But a child could create a problem. As pointed out in an article in Tuesday’s New York Times, lenders are taking a harder look at prospective parents who are out on leave, which means the timing of a baby’s arrival could affect their ability to get a mortgage.
In the article, it states that some loan underwriters are reluctant to qualify borrowers when their income drops, due to a birth of a child. And some lenders will not include short-term disability payments as qualifying income. In fact, the New York Times reported that some lenders will not approve new borrowers until they are back at work and have received their first paycheck.
Here’s an excerpt from the New York Times:
For some lenders, that may mean approving a loan only after the borrower is back at work “There is no real assurance that the new mom will come back to work after she has the baby,” said Marc Savitt, president of the Mortgage Center, a brokerage in Martinsburg, W.Va. “It’s just prudent underwriting to go ahead and approve the loan, but she has to be back before closing.” (Lenders cannot ask a woman if she is pregnant, brokers said, but they can ask borrowers if they expect their employment or income situation to change.)