Do banks count Social Security as income?

Most lenders consider pension, Social Security and investment income as your regular income. You may also be able to include your annuity, survivor or spousal benefits and retirement account income as long as you can prove it'll continue for at least 3 years. Your assets can contribute to your ability to get a loan.

rocketmortgage.com - How Lenders View Retirement Income - Rocket Mortgage

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Contrary to popular belief, there is no set dollar amount you need to have to buy a home. Lenders are much more concerned about your ability to pay back your loan than they are about how much money you earn. Financial investment company Fannie Mae instructs lenders to look for borrowers with dependable and predictable income. While working borrowers can prove their income with a W-2, you might have a bit more trouble proving that you have a stable income if you don’t work. However, it’s possible to combine your sources of income and still qualify for a loan. The first step in deciding whether you can afford to buy a home is assessing your income. If you’re retired, you may have multiple streams of income that contribute to your overall household budget. Let’s take a look at a few assets and income sources you can use to improve your chances of getting preapproved for a mortgage loan.

Fixed Income

As a retiree, you may have several sources you use to contribute to your overall income. Let’s take a look at how lenders view each of them. Social Security: If you worked during your younger years, you probably receive regular income from Social Security. Lenders view these payments as your primary source of income during retirement. They also don’t put an expiration date on Social Security funds as long as you’re drawing them from your own personal work record. Pension: Lenders also consider income from government or corporate pension to be regular and consistent. You don’t need to prove that your pension income will continue if you include it in your application. Spousal Or Survivor’s Benefits: Mortgage lenders consider spousal support or survivor’s benefits as limited sources of income. This is because these payments will eventually run out. If you want to count your spousal or survivor’s benefits in your income when you apply for a loan, you must prove that you’ll receive payments for at least 3 years. Retirement Accounts: If you draw money from a 401(k) , Roth IRA, traditional IRA or another retirement account, you can use this income to qualify for a loan. You must prove that your payments will continue for at least 3 years beyond the date of your mortgage. Most lenders will only consider 70% of the value of these accounts because they contain volatile assets that can suddenly drop in price. Income From Investments: Any income you receive from rental properties or dividend- or interest-producing assets can go toward your qualification for a loan. Lenders don’t require you to prove that this income will continue because you own the asset indefinitely. The only exception is if you draw income from an asset that diminishes over time.

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Annuity Income: You can use annuity income in your calculations as long as the annuity is set to continue. You must prove that your annuity payments will continue for at least 3 years after you take out your mortgage loan.

Use Your Assets

One issue that many individuals run into when they decide to buy a home is that they have most of their money tied up in assets. Of course, you can sell off some of your assets to put a larger down payment on your home purchase. However, you can also consider a securities-backed loan. Your assets back these loans and give your lender the right to your stocks, bonds and property if you fail to repay. Like retirement accounts, lenders may only consider up to 70% of the value of assets that can quickly fluctuate in value. The bottom line? Lenders are much more interested in your ability to repay your loan than the exact amount of money you earn. This means that it’s particularly important to carefully consider how much home you can afford before you begin shopping. If you’re looking for a good place to start, check out the mortgage calculator from Rocket Mortgage®. This tool shows you a rough estimate of your monthly payment based on the amount of money you borrow. Play around with the calculator to get a rough idea of how much you can comfortably afford to borrow considering your income.

rocketmortgage.com - How Lenders View Retirement Income - Rocket Mortgage

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