Temporary Leave Loan Qualification
Temporary leave from an employer may encompass various circumstances (e.g. family and medical, short-term disability, maternity, other temporary leaves with or without pay). Under no circumstances should any medical documentation be required or any inquiry regarding the nature of the disability be made. Temporary leave may vary in duration. The period of time that a borrower is on temporary leave may be determined by various factors such as applicable law, employer policies, and short-term insurance policies and/or benefit terms. Leave ceases to be considered “temporary” when the borrower does not intend to return to the current employer or does not have a commitment from the current employer to reinstate his or her employment.
The income that may be used to qualify depends upon whether the borrower will return to the current employer before or after the first payment due date. The following documentation is required for all borrowers whose income is used to qualify while on temporary leave:
• Full documentation of the borrower’s pre-leave income and employment
• Documentation evidencing amount, duration and consistency of all temporary leave income sources (e.g. short-term disability benefits or insurance, sick leave benefits, temporarily reduced income from employer) that are being received during the temporary leave
• Documentation from the current employer confirming the borrower’s statutory right to return to work (or the employer’s commitment to permit the borrower to return to work), the confirmed date of return, and the borrower’s post-leave employment and income
• A written statement signed by the borrower confirming that the borrower will return to the current employer and stating the confirmed date of return that has been agreed upon between the borrower and the employer
For borrowers returning to the current employer by the first payment due date, the gross monthly income amount that will be received upon the borrower’s return to the current employer may be used to qualify.
For borrowers returning to their current employer after the first payment due date, they should be aware that the gross monthly income amount received for the duration of the temporary leave may be used to qualify them for a mortgage. In the event that the temporary leave income has been reduced or interrupted, available liquid assets may
be used as a partial or complete income supplement up to the amount of the income reduction, subject to the following requirements:
• All available liquid assets used to supplement the reduced income for the duration of the temporary leave must be documented.
• The total qualifying income must not exceed the gross monthly income that will be received upon the borrower’s return to the current employer.
Assets that are required for the transaction (e.g. down payment, closing costs, financing costs, prepaids, escrows and reserves) may not be considered as available assets.