Income · Fannie Mae Selling GuideBuying a home on maternity or parental leave: how Fannie Mae counts your income

Temporary leave – usually employee-initiated and short, such as maternity or parental leave or short-term medical disability – doesn't stop a buyer from qualifying with a Fannie Mae loan (Selling Guide B3-3.3-09). A furlough or layoff started by the employer isn't temporary leave. When the lender learns that a borrower whose income is needed will be on leave at closing, it documents the leave income (if any) and its duration, the regular income before the leave, the borrower's written intent to return to work, and the employer's confirmation of the expected return date – an earlier letter or a printout from the employer's or its leave administrator's system works. A verbal verification of employment is still required, and if the employer confirms the borrower is on temporary leave, the borrower is considered employed. If the borrower will be back at work by the first loan payment date, the regular income counts. If not, the lender uses the lesser of leave income or regular income, and may add 'supplemental income' from liquid reserves: reserves left after the down payment, closing costs, required payoffs, escrows and minimum reserves, divided by the months from the first payment date until regular pay resumes (rounded up), with the total capped at regular income. In Fannie Mae's example, $2,000 of leave pay plus $12,000 of spare reserves over four months gives $5,000 a month of qualifying income against a $6,000 salary. A lender may not ask a borrower who isn't on leave whether they plan to take leave.