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FHA – Calculating Income When Borrower is On Temporary Leave


My client has been employed by the same company for 15 years.  She is currently on FMLA/Temporary leave and returns to work before the first payment on her new mortgage, but not before the loan closes. Her FMLA leave time is 10 months, so I’m unsure if that is considered “temporary.”


As long as a company still employs a borrower, then yes, 10 months of leave is still considered temporary. Any amount of leave where the borrower is still employed, eligible to return to work, and intends to return to work is considered temporary leave.

When a loan closes prior to the borrower’s return to work, FHA does not require a pay stub. (See the detailed guidance below.)

That said, while your secondary market shouldn’t request a paystub after closing, I can never guarantee what overlays you may be subject to.


FHA 4000.1 II.A.4.c.

(C)Addressing Temporary Reduction in Income

For Borrowers with a temporary reduction of income due to a short-term disability or similar temporary leave, the Mortgagee may consider the Borrower’s current income as Effective Income if it can verify and document that:

  • the Borrower intends to return to work;
  • the Borrower has the right to return to work; and
  • the Borrower qualifies for the Mortgage, taking into account any reduction of income due to the circumstance.

For Borrowers returning to work before or at the time of the first Mortgage Payment due date, the Mortgagee may use the Borrower’s pre-leave income.

For Borrowers returning to work after the first Mortgage Payment due date, the Mortgagee may use the Borrower’s current income plus available surplus liquid asset Reserves, above and beyond any required Reserves, as an income supplement up to the amount of the Borrower’s pre-leave income. The amount of the monthly income supplement is the total amount of surplus Reserves divided by the number of months between the first payment due date and the Borrower’s intended date of return to work.

Required Documentation

The Mortgagee must provide the following documentation for Borrowers on temporary leave:

  • A written statement from the Borrower confirming the Borrower’s intent to return to work and the intended date of return;
  • documentation generated by the current employer confirming the Borrower’s eligibility to return to the current employer after temporary leave; and
  • documentation of sufficient liquid assets, in accordance with Sources of Funds, used to supplement the Borrower’s income through the intended date of return to work with the current employer.