Yes, you can absolutely qualify for a mortgage using retirement income. Lenders accept Social Security, pensions, 401(k) and IRA distributions, and annuity income.
Documentation needed: Social Security award letter, pension statements, 401(k)/IRA distribution records. If the income will continue for 3+ years, it counts fully.
For retirement accounts you are drawing from, lenders average the distributions. For accounts you are not yet drawing, asset depletion may be an option.
Qualifying Retirement Income Types
Accepted income: Social Security (retirement, survivor, disability), pension income (monthly or lump sum annuitized), 401(k)/IRA required minimum distributions, and annuity payments.
Documentation Needed
You need: Social Security award letter (SSA-1099), pension benefit statements, 401(k)/IRA statements showing distribution history, and tax returns showing the income was received.
Income Calculation
Lenders average 2 years of retirement income. If you received ,000/month in Social Security and ,000/month from a pension, your qualifying income is ,000/month.
How Long Income Must Last
Lenders need the income to continue for at least 3 years. Social Security and lifetime pensions qualify easily. Time-limited income (e.g., 5-year annuity) is prorated.
Asset Depletion Alternative
If you have significant retirement savings but aren't taking distributions yet, asset depletion loans can create monthly income from your account balance. Assets divided by 360 months = monthly income.
Social Security Rules
Social Security income: non-taxable portion can be grossed up by 15-25% (varies by lender). COLA increases are factored in. Survivor benefits count if they will continue for 3+ years.