Can you use social security income to qualify for a mortgage?

By Michael Jensen, Mortgage and Finance Guru

Edited by Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Updated October 20, 2020

Social security income can be used to qualify for a mortgage from the date of receipt. Specifically, you can include social security income in your loan application as long as you are scheduled to receive your first payment before your first mortgage payment is due. For this reason, you do not need to wait a certain period of time before you can get approved for a mortgage using social security as a sole or partial source of income.

Using social security income is viewed favorably by lenders because it is a stable, effectively permanent income source. The more steady and reliable your income, the more likely you are to pay your monthly mortgage payment on time and repay your loan, which is good news for lenders.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income including social security

You can use multiple documents to verify that you receive social security including your bank statement, account statement or a copy of your check. Lenders also require that you provide a copy of your benefit letter that outlines the monthly social security payment you receive.

If you are receiving social security on behalf of someone else, such as a relative or a current or former spouse, you are required to provide documentation that verifies that the payments are expected to continue for at least three years. If the documentation shows that the payments end within three years you cannot use that income to qualify for the mortgage, although you can still use any social security income you personally receive from your own account.

One point that we should highlight is that if your social security income is not taxed, the lender is permitted to gross-up the income. This means that the lender includes an income figure in your mortgage application that is higher than the amount of income you actually receive to account for the fact that you do not pay tax on that income.

The amount of the gross-up is 25% or higher if someone with a similar level of income pays higher taxes. For example, if you receive $1,000 in nontaxable social security income and the lender applies a 25% gross-up, then $1,250 in income is included in your mortgage application. We recommend that you consult an accountant or tax specialist to understand if your social security income is not taxable.

Social security income is added to any other income you receive to determine the mortgage you can afford. For example if you have a full or part-time job or receive income from a retirement account, this income can also be included in your loan application assuming it meets the lender’s qualification guidelines.

When you apply for a mortgage, you typically need a one-to-two year work history to include income from a job and you need to verify that retirement account income is relatively steady and expected to continue for at least three years.

In closing, social security is an excellent source of income when you apply for a mortgage. As long as you provide the required documentation, the income can be used to help you qualify for the loan or increase the loan amount you can afford.

The table below shows mortgage terms for leading lenders in your area. We recommend that you contact multiple lenders to confirm their qualification guidelines. Shopping lenders is also the best way to save money on your mortgage.

Sources

"B3-3.1-09, Social Security Income."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, October 2 2019.  Web.