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August 2, 2014, 4:05 PM  |  Business

Many couples decide to buy a home when they’re expecting their first child. Excited about the new baby and the new home to accommodate their growing family, they share the news with everyone they know (or the tell-tale baby bump gives it away). But in some cases, especially if the wife earns the lion’s share of the household income, this could backfire.

U.S. mortgage lenders were recently fined for discriminating against the mortgage applications of pregnant women, and at least one Canadian broker alleges the same thing happened to his client.

Lenders use the borrower’s debt to income ratio to determine the borrower’s creditworthiness. Their concern is that if a couple or individual qualifies for a mortgage based on the woman’s income, that income may be reduced during her maternity leave and the borrower may default on the loan.

Yet many people become more financially conservative after starting a family, so they may be more likely to cut back in other areas to avoid the risk of losing their home.

Different mortgage lenders have different policies regarding the use of a pregnant woman’s income to qualify for a mortgage. Often, this depends on when the mother-to-be is going on maternity leave and whether she has a return date scheduled with her employer.

If the woman is already on leave, some lenders will use 100 percent of the employee’s income to qualify for a mortgage—provided they have a letter from the employer confirming the return date and salary. In some cases, this date must be within 60 days or the percentage of the income the lender will factor into underwriting drops down to 60 percent. Other lenders require that the return date be within six months or they may make exceptions on a case-by-case basis.

If you’re unsure how maternity leave or other income situations may impact your mortgage eligibility, contact a mortgage broker to discuss your situation. Mortgage comparison websites like Lavarates.ca can help you compare interest rates and learn more about the process.

Words by Atrina Kouroshnia

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Atrina is an independently licensed mortgage broker in the province of British Columbia. She specializes in helping first-time home buyers invest in their future through the purchase of their first home. Atrina works to find solutions that best suit her client’s needs and lifestyle. 

Website – www.lavarates.ca
Twitter handle – @lavarates

 

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