Getting a mortgage on retirement income: what counts and how it is calculated
A retired borrower with a paid-off house and seven figures in an IRA can be harder to approve than a thirty-year-old with a pay stub. Nothing is wrong with the finances; the problem is that conventional underwriting is built around monthly income, and retirement wealth does not arrive that way until you make it.
Age is not an underwriting factor
The Equal Credit Opportunity Act prohibits discrimination on the basis of age in credit transactions. A lender may consider age only where it bears on something legitimate — principally whether an income stream will continue — and may not decline a loan, shorten a term, or demand a larger down payment because the borrower is 72. A thirty-year mortgage does not have to be repaid within the borrower’s lifetime; it is secured by a house that outlives everyone. Our page on ECOA and Regulation B sets out what the rule does and does not cover, and the retirees and seniors profile collects what usually comes up in these files.
What counts as income, and what documents it
The table below reflects Fannie Mae’s guidelines. Freddie Mac’s are comparable but not identical, and individual lenders add overlays, so ask which set your file is being underwritten to.
| Source | Typical documentation | Continuance test |
|---|---|---|
| Social Security on your own record (retirement or disability) | SSA award letter, SSA-1099, signed returns, proof of current receipt | No continuance verification required absent a reason to doubt it |
| Survivor benefits | Award letter plus proof of receipt | Must be documented to continue at least three years from the note date |
| Pension | Statement from the payer, award letter, bank or tax records | Documented through the plan or program terms rather than a generic three-year letter |
| IRA, 401(k) or Keogh distributions taken as income | Most recent account statement plus evidence of receipt | Three years; eligible account balances may be combined to prove it, and access must be unrestricted |
| Annuity | Contract or payer statement | Three years from the note date |
| Employment-related assets (asset depletion) | Account statements; a calculation rather than a payment | Governed by the program’s own limits, below |
| Part-time W-2 or 1099 work | Pay stubs and W-2s, or returns for contract work | Standard employment rules apply |
| Interest and dividends | Generally two years of returns | Assets spent on the down payment and costs are netted out first |
Two mechanical points decide many of these files. Fixed distributions require no minimum history; variable ones generally need twelve months. And money you have not started taking is not income — if the plan is to draw from an IRA to make the mortgage payment, the distributions usually have to be set up and received before the lender can count them.
The gross-up on nontaxable income
Because debt-to-income is measured on pre-tax income, nontaxable income is adjusted upward so it is compared on the same footing. Fannie Mae’s guidance is to add 25% of the verified nontaxable amount, or the actual tax that a wage earner in a similar bracket would pay if that is higher. On $2,900 a month of nontaxable Social Security, the qualifying figure becomes about $3,625 — an extra $725 that can move a borderline ratio. The catch is that only the portion that is genuinely nontaxable may be grossed up, and Social Security is partly taxable for many households, so the lender documents which part qualifies from the return.
Asset depletion, precisely
When there is real wealth but not enough monthly income, the employment-related assets route converts a balance into a monthly figure. It is a narrow program, and the limits matter as much as the arithmetic:
- Maximum 70% LTV, CLTV and HCLTV — raised to 80% when the owner of the assets is at least 62 at closing. In practice that is a 20% to 30% down payment.
- Purchase and limited cash-out refinance only, and principal residence or second home only. No cash-out, no investment property.
- Assets must be owned individually by the borrower, or any co-owner must be a co-borrower on the loan.
- Eligible: 401(k), IRA, SEP and Keogh accounts the borrower can access without restriction, plus non-self-employed severance packages and lump-sum retirement distributions.
- Ineligible: stock options, non-vested restricted stock, lawsuit or lottery proceeds, an inheritance not yet received, proceeds from a real estate sale, divorce proceeds, and virtual currency.
The calculation is unforgiving in a useful way. Net documented assets equal the eligible balances minus any early withdrawal penalty and minus every dollar used for the down payment, closing costs and required reserves. That net figure is divided by the loan’s amortization term in months. Start with $900,000 in IRAs, spend $80,000 on the down payment and costs, and $820,000 ÷ 360 produces about $2,278 of monthly qualifying income. The money is not withdrawn and not pledged — it is simply counted.
Putting it together
A retired couple with $2,900 of nontaxable Social Security (grossed to $3,625), a $1,750 pension and $2,278 from asset depletion qualifies on roughly $7,653 a month. With $450 of other monthly debt payments and a 45% ceiling, the housing payment that fits is about $2,990 — principal, interest, taxes, insurance and any association dues, all of it, as explained in our guide to debt-to-income limits. Note what the asset route costs: it caps the loan at 70% or 80% of value, so the same borrower cannot use it and put 10% down.
Practical sequencing
- Apply before you retire when the timing is yours to choose. A pay stub is the simplest document in the file, and once employment ends the income has to be rebuilt from statements and award letters.
- Start distributions early enough to document receipt if they are meant to qualify you, and keep them consistent through closing.
- Do not liquidate to a checking account the week before applying. Large unsourced deposits create work, and moving retirement money can create tax consequences the lender does not weigh.
- Ask which agency route is being used. Asset-based income has different names and different caps at different lenders; a decline on one program is not a decline on all of them.
- Compare against not borrowing at all. A larger down payment, a smaller house, or for owners 62 and older a reverse mortgage with its own significant trade-offs may fit better than stretching a ratio.
A HUD-approved housing counselor will review the whole picture at no cost, and the conventional loan hub covers the rest of the requirements. Claude Loan is an information site, not a lender, broker or financial adviser, and no article can promise how a particular underwriter will read a particular file.
Frequently asked questions
Can I get a 30-year mortgage at 70?
Yes. Age itself is not a permissible basis for denying credit or shortening a term under the Equal Credit Opportunity Act, and lenders do not underwrite to life expectancy. What is examined is whether the income used to qualify is documented and expected to continue — which is why Social Security on your own record and a lifetime pension are straightforward, and a five-year annuity is not.
Do I have to withdraw money from my IRA to qualify?
It depends on the route. If retirement distributions are the qualifying income, they generally must be set up and actually received. Under the employment-related assets program the balance is converted to a monthly figure by formula and no withdrawal is required — but that route caps the loan at 70% of value, or 80% if the asset owner is at least 62.
Can I qualify on Social Security alone?
Sometimes, on a small enough loan. The benefit is grossed up by 25% when it is nontaxable, and the resulting figure has to carry the full housing payment plus other debts inside the lender’s ratio ceiling. Many retirees fall short on income alone and close the gap with a pension, part-time work, rental income or asset depletion.
Does a large bank balance help if my income is low?
Indirectly, in two ways. Reserves are one of the strongest compensating factors an automated approval recognizes, as our guide to mortgage reserves explains. And if the funds sit in eligible retirement accounts, they may also produce qualifying income under the asset-depletion rules. Cash in a plain savings account counts as reserves but not, by itself, as income.
Sources
Related: Debt-to-income ratio limits by loan type — and how to lower yours, Mortgage reserves: how many months lenders want left after closing, Conventional loan requirements in 2026: what Fannie Mae’s guide actually says, Self-employed and buying: how conventional lenders calculate your income. Hub: Conventional loan.