Mortgage Loan Applicants May Face Pregnant Pause

Lowest Mortgage Rates Denied to the Pregnant

Current mortgage rates--the lowest for 50+ years--are unsurprisingly attracting young couples who want to buy their first home, trade up to a larger house, or refinance. Perhaps those who are most eager to move (because they need more space) or to refinance (because they have to save money) are people who are expecting a child.

And yet, according to the New York Times of July 19, 2010, these are precisely the ones whom many lenders are turning down for mortgage loans. Those taking a break from work to have a child, even if it's only for a matter of weeks, may find their application blocked. That applies equally to those who will receive a short-term disability benefit to cover a period off work. That's because the benefit does not continue for the three-year minimum that income counted for mortgage purposes must be expected to last.

The whole thing is positively Kafkaesque.

Lenders facing new quality assurance guidelines want to be very sure that someone taking time off to care for a new addition will in fact return to work. But Fannie Mae and Freddie Mac aren't the sources of this extraordinary caution, at least not directly. They do require that the borrower's employment and credit be reverified just prior to closing, probably in response to the increased number of layoffs throughout the country.

Janis Smith, a spokeswoman for Fannie Mae, told The New York Times in a recent interview that as long as the borrowers can prove their income at closing, there would be nothing that would preclude them from qualifying for a loan. In addition to an employer's letter stating a return to work date, Smith advises having a letter from a doctor okaying a return date to work.

Opportunity Knocks

If you're not pregnant, are up to date with your mortgage, and have a reasonable credit score, you could take advantage of today's lowest mortgage rates to move home or refinance. Check out the deals available here.