Federal laws prevent a mortgage lender from discriminating against someone due to their age. If your credit history is acceptable and you meet the income guidelines for the lender, typically you will qualify for a mortgage even if your only income is from investments and pensions.
You must show documentation of your pension income if you want the lender to consider it when determining your ability to qualify for a loan. You can use your award letter from your pension provider that you received when you retired. Your lender can require that you provide proof that you are receiving pension payments for at least three years. Your award letter verifies your pension terms and provides the lender with the length of time that you are receiving pension payments. Other documentation can include check stubs and, in the case of direct deposits for pension payments, copies of your bank statements.
When you apply for a mortgage, lenders typically require copies of your tax returns from at least the last two years. Your tax returns provide evidence of your investment income that the lender can then average by the number of returns you provided. This average allows the lender to determine how much investment income you can expect to have. The lender also needs statements from your brokerage to verify that you currently own the investments providing the income.
Lenders use ratios to determine if you qualify for a mortgage. The rule of thumb for determining your income is that your mortgage expenses, including your payment, insurance and taxes, should not be more than 28 percent of your income, according to Bankrate.com. If you have other income such as Social Security payments, rental property income or alimony, give your lender all of the documentation proving the income if you want the lender to consider the income when qualifying you for a mortgage. Multiply all of your pretax income by 28 percent and divide the amount by 12 to calculate your mortgage expense ratio.
Your credit score affects your ability to qualify for a mortgage as much as your income does. Your credit reports show your payment history, how much debt you have, how long you have had credit and any new accounts you have opened. Each of these affects your credit score by varying amounts. The higher your credit score -- 700 or above -- the more likely you are to qualify for a mortgage with a low interest rate. If your credit score is below 600, you might still qualify for the loan, but your interest rate will be higher than qualifiers with high scores.
- Bankrate.com: How Much House Can You Buy?
- Bankrate.com: How Credit Scores Affect Mortgage Rates
- Federal Housing Administration. "Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance Fund," Page 52. Accessed April 10, 2020.
- My Fico. "Loan Savings Calculator." Accessed 10, 2020.
- Fannie Mae. "Underwriting Factors and Documentation for a Self-Employed Borrower." Accessed April 10, 2020.
- Internal Revenue Service. "Form 4506-T: Request for Transcript of Tax Return," Page 1 - 2. Accessed April 10, 2020.
- Internal Revenue Service. "Form 8821: Tax Information Authorization," Page 1 Accessed April 10, 2020.
- Internal Revenue Service. "Form 4506: Request for Copy of Tax Return," Page 1 - 2 Accessed April 10, 2020.
Specializing in business and finance, Lee Nichols began writing in 2002. Nichols holds a Bachelor of Arts in Web and Graphic Design and a Bachelor of Science in Business Administration from the University of Mississippi.