Applying for mortgage during maternity

[Leo]

Asking for my sister. Can they get a mortgage while she is in maternity leave?

A little back story, my sister been in this company for several years as full time employee. Due to COVID, she got demoted to a part time employee. She is now getting unemployment insurance while part time so her original take home is the same back when she was full time. Her husband is the primary income earner.

Her due date is around September or October I believe. She will become a full time again maybe a month before the delivery then after the baby is born, of course she will have California EDD benefits of disability insurance + paid family leave after (I believe total of 14 weeks).

During this time, they want to apply for a mortgage. (They don't want to apply now because her being part time with unemployment does not look good either). They are worried that lender will see that she is on maternity leave and might affect their purchasing power. They have great credit score, no debt, got cash for down payment, etc. and her husband has decent salary. Also they are not sure how mortgage lender will see her history of just becoming a full time again recently.

Worst case is they wait until they are back at work both full time before applying for a mortgage which is probably sometime next year. I don't think they want to wait that long though but I think this is maybe the best option.

Any thoughts?

[kork13]

Personal opinion? Just apply.
- If he makes a decent income, they have good credit, cash on hand, and she has even just part time income, they should qualify for a reasonable mortgage regardless of her unemployment income.
- Her pregnancy/maternity leave is considered a disability (note that she qualifies for CA's disability program), putting her into a protected class when it comes to three federal fair lending laws. Her 'disability' cannot legally be considered as a factor in any lending application, per the Equal Credit Opportunity Act and the Fair Housing Act.
- Worst case, they get rejected, and they reapply later when she's back to full employment. Fair case, they get approved for a lower amount than hoped and/or not at the rate they're hoping for. They can choose to take it, or wait. Best case, they get approved no problem, and they move into a great new house within a few months.

It's easy to get wrapped up worrying about mortgage companies judging your specific personal situation.... But it really matters very little. Show the facts, shop around, and get it done. Can they afford the mortgage they're pursuing on their current income? Yes? Apply. Can they afford it on one income? Yes? Apply (if this is the case & her situation worries them do much, they could always just apply in his name only). Can they only afford it with her full-time income? Yes? Wait, or find a less expensive house (and apply now).

[disneysteve]

Can they afford the mortgage they're pursuing on their current income?

This is really the key question. If they can afford the loan they want on their current income, it doesn't matter if she's part time, full time, on maternity leave, or what. If the numbers work, they work.

[Leo]

I believe she is earning around 50k a year and her husband income is like 4x so I am guessing 200k in mid-level management. When I talked to her, they want at least a million dollar house which I'm thinking 4x of their combined annual income. I'm sure they have the down payment and can afford it. Don't ask me why they want a house like that but considering the prices now here in Los Angeles and their status, I'm sure they will be fine and it's not really that unreasonable.

I think the worry at the moment is that, with her being part time, their combined income I am assuming is just at 225k (instead of 250k on paper) and 4x of that is a little short of the price range they want to buy.

You're right, I guess the best advice I can give to her is to apply and if they got rejected or got approved for a lower amount than hoped, they can choose to wait until she's back at full employment.

Can they afford the mortgage they're pursuing on their current income?

With her husband's full income, and her part time income currently, and their down payment, budget, debt to income ratio, other numbers, I think they can. Will someone loan them 800k with their current income of 225k? I guess that's the only question I and my sister don't know and applying for a mortgage will be the only answer.

[kork13]

With those numbers, I don't think the difference of $25k of income will make much of a difference. The $25k swing is just 10% of their income. They'll either qualify or they won't. From my (admittedly limited) understanding of the HCOLA markets like LA, a $225k income will qualify for an $800k mortgage just fine. Not certain they'll qualify for a 15yr fixed as we'd normally recommend, but almost definitely a 30yr.

We do have a number of active folks from CA around here, they can probably give a good perspective as well.

[Leo]

Yeah totally make sense. Although a 250k income looks better on paper, I think a 225k income can qualify for 800k loan for a 30yr assuming they have great credit score, good employment history, and no debt at all.

[Sidiusss]

I think you'd better wait until your wife is able to work full time so that there will be no problems in the future. If you want to get a mortgage now, then you should look for better terms of the deal. There are some companies that provide excellent conditions for later life lending, which can be an excellent solution to your problem. By issuing a mortgage for a person of retirement age, you will save a large amount, and, being the guarantors in the mortgage, you will be able to pay off the debt on a monthly basis. I did the same, taking out a mortgage on my father. My parents have a good monthly income and they managed to conclude a contract. I have already paid off most of the mortgage, and until this moment I did not encounter any problems.