Lenders - how would this you handle my situation?

[Michael Valentine]

I posted this in another forum before I noticed this one, so I apologize for the previous cross post...

I'm trying to leverage my W2 job with a conventional mortgage for a property that either be a "second home" designation or an investment property (most likely SFR but might be a small multi 2-4 unit).

I realize having a long tenure at a W2 is a big factor in getting good rates and terms with most lenders, so here is my situation. I have been with my current employer for over 25 years. I know from other purchases the lender usually wants a copy of recent pay stubs to verify employment, but I also understand that some lenders actually call HR on the day before the clear to close or thereabouts.

I am currently employed, but I am out on medical leave for several months. I still draw a paycheck as I am using sick time that I have accrued over the many years. I still have my medical benefits, etc.

My questions are - first - would a lender be made aware of this by HR? I'm not sure what they are allowed to ask or be told, etc. Second, if they are made aware, would my medical leave be considered a "risk factor" that might change the rate/terms/viability of my loan at the 11th hour and jeopardize my RE transaction?

Thank you in advance, I really appreciate your advice!

[Jeff Shumway]

Hi Michael, as long as you intend to return to work you should be fine. The lender will require a letter from you and/or your employer confirming your intent to return to work and the date you plan to return.

The conventional guidelines for short term absences from work are here if you're curious to read more about it;

https://selling-guide.fanniema...

If you decide not to return to work but still wish to get an investment property, you could potentially use a debt service coverage ratio loan. This loan type does not require the use of your personal income to qualify and only looks at the potential income from the subject property, credit, down payment, and assets.