Can you get a mortgage with just Social Security income?

  • If the only income you receive is from Social Security, you may still qualify for a mortgage.
  • In some cases, a lender may be able to “gross” your income if the benefits you receive are not taxable.
  • In addition to sufficient income, you’ll need a low debt-to-equity ratio, a good credit rating, and a large enough down payment to qualify for a mortgage.

Before approving a mortgage applicant, lenders will review their income to ensure they have the ability to repay the money they borrow. As long as your income comes from an acceptable source, this shouldn’t stop you from getting approved for a mortgage.

If you have Social Security income, you can use it to qualify for a mortgage. But whether you will ultimately be approved will depend on your overall financial situation.

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Can you get a mortgage in retirement?

Yes, you can get a mortgage in retirement, even if your only income comes from Social Security retirement benefits or other types of Social Security.

Retirees and others living on a fixed income can sometimes have a harder time qualifying for a mortgage if their income is too low compared to the amount of debt they would incur. But if you have enough income from an acceptable source, lenders can’t turn you down just because you’re old or on Social Security.

How to Use Social Security Income to Get a Mortgage

When you apply for a mortgage loan, you must submit documents proving that you have a stable source of income. For Social Security benefit recipients, this means you’ll need to show your lender that you’re currently receiving benefits and how much you receive each month.

To get this information to share with your lender, you can request a Social Security Benefits Verification Letter from the Social Security Administration website.

Once you’ve verified your income and completed the rest of your application, the lender will review your overall financial profile to determine if you qualify for a mortgage and, if so, what monthly payment amount you can afford.

Low-income people may have a harder time getting mortgage approval because a mortgage can push your debt-to-income (DTI) ratio too high. Your DTI is the total of all your monthly debt payments compared to your monthly income. If you earn $2,000 a month, for example, a monthly mortgage payment of $1,000 would put you at a DTI of 50%, assuming you have no other debts.

A DTI of 50% is usually the maximum allowed by a lender, but depending on your lender and the type of mortgage you get, it may be lower.

How lenders collect Social Security income

Lenders cannot deny applicants credit simply because their income comes from Social Security. Social Security income is treated like any other type of income, with one exception that may work in favor of recipients.

Mortgage lenders typically look at an applicant’s gross income when qualifying for a mortgage. Your gross income is what you earn before taxes are deducted from your paycheck, so the lender’s calculations are set up to take that into account. But many people who receive Social Security benefits do not have to pay taxes on that income.

For example, if you receive Social Security Disability Income (SSDI) on which you are not required to pay taxes, your lender may be able to “gross” your income by 25%, according to Shashank Shekhar. , founder and CEO of InstaMortgage. .

“So if you’re getting $1,000 a month, that income could actually be $1,250 when it comes to qualifying subscriber income, because a lot of that income is tax-exempt,” Shekhar says. .

Your income adjustment depends on the type of benefits you receive and whether or not they are taxable. Standard Social Security and SSDI retirement benefits may be taxable up to a certain amount if your total income is more than $25,000 (or $32,000 for jointly filing spouses). Supplemental Security Income (SSI) is not taxable.

What else do you need to qualify for a mortgage

Remember that lenders will look at your whole financial situation, not just where your income is coming from. To improve your chances of getting mortgage approval, you should have:

  • A good credit rating. Conventional mortgages require a credit score of at least 620, while FHA mortgages require scores of 580. The higher your score, the more likely you are to be approved. Those with higher scores also generally get better interest rates.
  • Sufficient down payment. Conventional mortgages allow down payments as low as 3%, while FHA mortgages require 3.5%. Depositing more than that can increase your chances of approval, help increase your buying power, and earn you a lower rate.

Also, if you have other sources of income besides your Social Security income, be sure to include that in your application. This could include things like retirement accounts or investment income.

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