Can you use an annuity to qualify for a mortgage?
Annuity income can be used to qualify for a mortgage as long as you provide the documentation required to verify the income. In fact, income from an annuity is preferred by mortgage lenders because of its stability and predictability.
To include annuity income in your mortgage application, your first step is to show that you own and receive payments from the annuity. You can satisfy this requirement by providing your annuity plan paperwork or award letter.
You may also be required to submit your bank statements or a recent annuity account statement that shows you are currently receiving the income. As a general mortgage industry requirement you are also typically required to provide your tax returns for the prior two years.
The lender is also required to confirm that your annuity income is going to continue for at least three years after you submit your loan application. If you own a lifetime annuity this guideline is usually easy to meet. You can also use a fixed period annuity -- also known as a term certain annuity -- to qualify for a mortgage as long as the payment duration is at least three years.
It is important to highlight that if your annuity income is subject to change due to fluctuations in underlying assets such as stocks, bonds or mutual funds, then lenders may apply a discount to the income to account for a potential decrease in the future. If your annuity payments are fixed then lenders include this full income figure in your application.
Your monthly annuity income is added to any other income sources you receive to determine the mortgage you can afford. For example, income from a job or retirement income such as social security are also included in your application. The higher your monthly gross income, the higher the loan amount you qualify for.
Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on you annuity income and monthly debt expenses
Please note that if you received a lump sum annuity payout you can certainly use that money for the down payment to buy a home but you cannot use those funds as monthly income to qualify for the loan.
We recommend that you contact multiple lenders in the table below to review their document requirements for annuity income and to compare mortgage terms. This enables you to understand the steps required to qualify for the loan. Plus, shopping lenders is the best way to save money on your mortgage.
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We should also note that annuity income can be used to qualify for a reverse mortgage in addition to a home purchase loan.
Although a reverse mortgage does not have a monthly loan payment you are still required to demonstrate that you earn sufficient income to afford your property tax, homeowners insurance and homeowners association (HOA) dues, if applicable. An annuity can help you meet this financial requirement for a reverse mortgage
Review our comprehensive Reverse Mortgage Guide
You can also use the FREEandCLEAR Lender Directory to search over 3,900 lenders by type, rating and mortgage program. For example, you can search for top-rated reverse mortgage lenders in your state.
In closing, an annuity is a great source of income to qualify for a mortgage to buy a home or for a reverse mortgage. Make sure you have your annuity and tax documents organized before you apply for the loan and you should be well-positioned to qualify.
Sources
"B3-3.1-09, Other Sources of Income." Selling Guide: Fannie Mae Single Family. Fannie Mae, October 2 2019. Web.
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