What Happens to My Mortgage Application When I Take a Leave of Absence?

When you have unexpected (or even planned) absences from work, they can be stressful. This stress is multiplied when an absence become extended, and a loss or reduction in pay occurs.

Whether your leave is planned, like maternity or paternity leave, or unplanned, like an accident or health condition, employers take different stances on how you'll be compensated.

Some are fortunate and receive their full pay and benefits when on extended leave. Others take a reduction or no pay for all or part of the time absent from work. There are numerous state and federal guidelines that impact an employer's decision.

But how does that tie in to your mortgage?

Family and Medical Leave Act

If you find yourself protected by your employer, where there's no change in your pay, the only question I've got for you is this – is your paid leave protected by Family and Medical Leave Act (FMLA)?

If it is, you should be good to go and can proceed with your mortgage application as scheduled. If your leave isn't protected by FMLA, you'll need to speak with a VA mortgage specialist to determine what, if any, documentation you'll need to provide to move forward.

If you're in the second group, and your pay will decrease or be nonexistent during your absence, pay close attention. We need to discuss how this may affect your VA mortgage process.

Reduced Pay During Absence

If your pay is reduced during an absence from work, you may have to postpone your home search. But, if you're able to qualify on the reduced pay, you can still proceed forward and close on a home during your absence, assuming you can provide all the necessary documentation.

Documents such as pay stubs reflecting the decreased pay, a letter of explanation outlining why you are on leave and a letter from your employer outlining the specific circumstances regarding your leave, your pay and employment history, among other documents may be necessary to move forward.

No Pay During Absence

If you're in a situation where you will be taking unpaid leave you have a couple options:

1. If you're married, you can attempt to qualify on just your spouses income
2. Wait until you're back on the job and can produce 30 days of pay stubs showing your full time pay is once again in effect.

While the options are limited, they do offer an opportunity to move forward. The main reason these restrictions are in place is to ensure you have income stability. Income stability is necessary to show you will be able to make your mortgage payment on time each and every month. In addition, there are costs associated with purchasing a home and if you aren't receiving any income for a period of time, you'll likely want to rebuild your savings before making such a large, life-changing investment.

It's always important to notify your VA mortgage specialist if you have advance notice of any type of leave that will reduce or stop your pay completely prior to closing on a home. By notifying your VA mortgage specialist and being proactive you can determine your home purchasing timeline and how this leave will extend it, if at all.

If you would like to discuss your specific situation further, please feel free to email me at samantha@vu.com!