Qualifying for a mortgage can be a challenge when you live on a fixed income. Basically, a lender wants to see that you have enough income to make the monthly mortgage payments. But even if you aren’t employed, the Federal Trade Commission points out that a lender must consider income from Social Security payments when you apply for a mortgage. The lender can ask to see proof that you receive the income on a regular basis.
Providing Financial Documentation
Lenders ask to see financial documentation as proof of income. You can verify your income by providing bank statements for the past two to three months and federal income tax returns for the past two years. If you live off payments you receive from the Social Security Administration, the lender will verify the income. When you apply for a mortgage loan, the lender also will want information about your debts, including on-going expenses such as monthly credit card payments, car loans and personal loans.
Verifying Social Security Income
If you receive Social Security retirement benefits, Supplemental Security Income or Social Security Disability Insurance, present your award letter when you apply for a mortgage loan. You can request an award letter, also known as a benefit verification letter, from the Social Security Administration online, by calling Social Security or by visiting a local SSA office. The letter shows the amount of the benefit payment you receive each month. A lender also may accept the most recent copy of your SSA-1099 -- Social Security Benefit Statement -- that Social Security mails to recipients for tax purposes each year.
Following FHA Rules
If you get Social Security benefits and are applying for a mortgage loan backed by the Federal Housing Administration, you must show proof that you received the income. FHA rules indicate that you can use Social Security income to qualify for a loan as long as the income is likely to continue for at least three years from the date of mortgage application, according to the Department of Housing and Urban Development. The lender verifies the income by asking you to provide copies of your federal tax return, Social Security benefit statement or your most recent bank statement showing the Social Security direct deposits.
Although a lender can turn down your mortgage application because your income may be too low, the rejection letter simply can’t state that you didn’t meet the minimum standards, according to The Federal Trade Commission. Under federal law, a lender must inform you in writing of the specific reason for not approving your loan; you have 60 days to request a rejection reason if the lender doesn't give you one in a timely manner. If your loan application is rejected because of negative entries on your credit report, the lender must give you the name and contact information for the credit-reporting bureau that provided the information.
- Federal Trade Commission: Mortgage Discrimination
- Consumer Financial Protection Bureau: What Documents Will My Lender or Mortgage Broker Request After I Have Found the Right Loan for Me?
- HUD.gov: Mortgagee Letter 12-15: FHA Approved-Mortgagees
- Social Security Administration. "SUMMARY of P.L. 98-21, (H.R. 1900) Social Security Amendments of 1983-Signed on April 20, 1983." Accessed Feb. 27, 2020.
- Social Security Administration. "Benefits Planner | Income Taxes And Your Social Security Benefit." Accessed Feb. 27, 2020.
- Social Security Administration. "Replacement SSA-1099." Accessed Feb. 27, 2020.
- AARP. "Which states tax Social Security benefits?" Accessed Feb. 27, 2020.
- Federation of Tax Administrators. "State Tax Agencies." Accessed Feb. 27, 2020.
- Social Security Administration. "Monthly Statistical Snapshot, January 2020." Accessed Feb. 27, 2020.
- Internal Revenue Service. "Roth Comparison Chart." Accessed Feb. 27, 2020.
- Internal Revenue Service. "Early Retirement Distributions and Your Taxes." Accessed Feb. 27, 2020.
- Internal Revenue Service. "Retirement Plan and IRA Required Minimum Distributions FAQs." Accessed Feb. 27, 2020.
- Internal Revenue Service. "Instructions for Form 1098-Q," Pages 1-2. Accessed Feb. 27, 2020.
- Internal Revenue Service. "Instructions for Form 1098-Q," Page 1. Accessed Feb. 27, 2020.
- Internal Revenue Service. "Internal Revenue Bulletin: 2014-30." Accessed Feb. 27, 2020.
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.