Many young families want to own their own home. Having a baby in a rental property can be frustrating; you are often limited in how much you can decorate, and the sense of instability may increase your stresses.
Buying a home may seem like the right decision – but if you let your lender know you’re pregnant, that may cause complications with your application.
While it is illegal for your lender to ask if you’re pregnant, or deny your mortgage application because of pregnancy, they do have the right to look at your income, both current and expected. If you’re going to be on parental leave in the future, your lender may refuse to consider your current income, even if you have a firm return to work date.
Leave Can Affect Calculated Income
Many companies are required to give new parents a certain amount of parental leave after the birth of a baby. Some companies offer partial salary benefits during that time as disability pay. Others don’t offer any benefits, and new families survive on savings, or on a single person’s income.
Lenders will often ask if the applicants expect to see any changes in income in their future. If you are asked this question, it is important to answer honestly. Not all lenders will ask, however, or they will ask the question in ways that leave some wiggle room.
Current estimates suggest that raising a child costs more than a quarter million dollars. It’s not surprising, then, that lenders take a long look at the expenses of a couple who are about to have a baby. New parents may remember to factor in the costs of the nursery and childcare, but forget to consider clothing, formula or breastfeeding supplies, increased cost of food, and more. This all needs to get factored in when you’re considering what you can afford in a mortgage.
So what do you do to maximize your chances of getting a mortgage when you’re pregnant?
Don’t Volunteer Information
Your lender asks a lot of questions such as your current credit score, monthly income and etc, when you’re applying for a mortgage. Again, it’s important to ask any questions that you are asked honestly, but don’t volunteer information. Remember, your lender can’t ask if you’re pregnant; if you’re early on, if you’re still just trying, you do not have to disclose that information.
Consider Product Transfers
If you have a current mortgage and are looking to move into a different home, contact your current lender and ask about product transfers. In this case, many lenders will not ask for additional income information, and you may have an easier time qualifying for an amount you can afford, but will give you the expanded room you need.
If You Have Savings, or Reduced Childcare Costs, Include This
If you do need to disclose information about an upcoming leave, paid or unpaid, balance that information as much as you can. Do you have savings that will cover the lost salary while one parent is out of work? Will you receive free childcare from family members, removing a significant cost from your family’s plate?
Showing this information can do two things for lenders: first, it can show them that your lost income will not affect your ability to pay your mortgage; second, it can show them that you’re planning for this change responsibly, which can increase their confidence that you will do what’s needed to pay your bills.
Complain About Discrimination
It is illegal to discriminate against pregnant people according to the Fair Housing laws, and lenders that are shown to be discriminating are often fined or even prosecuted. If you believe that you have been discriminated against, the first step is to complain to the lender. You may be able to get a denial reversed, or receive a more appropriate amount in lending.
If the lender is not responsive, the next step is to complain to the U.S. Department of HUD, housing and urban development. You can file a complaint online; complaints are not addressed instantly, though it is possible to request more rapid intervention if the problem is likely to cause irreparable harm to you or your family if it isn’t addressed.
Getting a mortgage while pregnant can be frustrating, so if you know your family is going to be expanding, it might be worthwhile to either move into a new home before you get pregnant, or wait until after the baby is born to get approved. If you can’t wait, it certainly is possible to get a mortgage while pregnant; it just might take some extra work.