Can You Get a Mortgage With Only Social Security Benefits?

It is possible, but you'll need to consider it carefully

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Most people apply for a mortgage during their working years because that's when their income is highest and it's easiest to make the payments. However, that's not the case for everyone. Maybe you're downsizing to a new home or relocating to be closer to family and need a mortgage to pull it off. 

Getting a mortgage using only income from Social Security is possible, but affording a mortgage is not as easy as it might have been when you were working. There are other considerations to take into account when you're buying a home as a retired person, too. Here's what you need to know.

Key Takeaways

  • It is possible to qualify for a mortgage on Social Security income alone.
  • You might not qualify for as large of a mortgage as you might if you were earning more income.
  • Your lender may ask for a Benefit Verification Letter from the Social Security Administration when you apply for a mortgage.

Can You Get a Mortgage in Retirement?

Yes, it's possible to get a mortgage in retirement, even if your sole source of income is Social Security benefits. It's common for people to think they won't qualify just because they're on Social Security, but in fact, the law protects you here. The Equal Credit Opportunity Act prevents discrimination by lenders based on several things, including your age and whether you're receiving public assistance such as Social Security.

However, just because you're receiving guaranteed income through Social Security doesn't mean you're automatically fast-tracked for a mortgage. You'll still need to go through the standard mortgage application and approval process. Here's where things can get sticky.

If you're receiving Social Security benefits based on someone else's work history, such as a spouse, ex-spouse, or parent, you'll need to provide your lender with verification that you'll be receiving benefits for at least three years into the future.

On its own, Social Security income usually isn't a large payment. In August 2021, the average retiree earned a monthly check of $1,559—which would put them at $5,828 per year above the federal poverty line for an individual. Lenders generally won't approve you for a mortgage if your total monthly debt payments, including the mortgage, exceeds 43% of your income.

This is known as the back-end debt-to-income ratio, and it means that the average retiree would only qualify for a mortgage with a monthly payment amount of $670, assuming they have no other debts. It can be hard to find a home with mortgage payments so low in many areas of the country unless you have enough cash on hand to make a larger down payment.

Individuals who do not qualify for a mortgage based on their debt-to-income (DTI) ratio may want to consider an FHA loan. You may be eligible for one of these government-backed loans even if your DTI is up to 50%, as long as other qualifications are met.

How Much Will You Get on Social Security?

How much you'll earn from Social Security in retirement depends on two main factors: How much you earned while you were working, and when you decided to apply for benefits.

The Social Security Administration takes into account 35 of your highest-earning years and averages them. You're allowed to apply for benefits as soon as you reach age 62, but your monthly paycheck will be cut by 25% for the rest of your life if you take them early. If you wait until the full retirement age of 67 before applying for benefits (for people born after 1960), you'll receive the full amount. If you wait even longer—up until age 70—you'll receive a credit that can boost your monthly Social Security payment by 24%.

You can see what your estimated Social Security income will be in retirement by creating a “my Social Security” account with the Social Security Administration. You can do this at any time, even before you're retired.

How To Qualify for a Loan on Only Social Security

Getting a mortgage on Social Security income alone won't be easy, but there are some things you can do to boost your chances of being successful.

Reduce Your Debts

If you're able, paying down any other debts you have can go a long way toward boosting your approval rating for the mortgage you want. Because you're generally limited to a back-end debt-to-income ratio of 43%, any percentage of your other debt you pay off increases the amount of the mortgage you can take out.

Improve Your Credit

Having good credit also affects what type of home you can buy, especially if you're on a fixed income with Social Security. Better credit usually means a lower interest rate, and that translates into more buying power. Your credit score is also a factor in your loan application. In other words, the better your credit, the lower your interest rate, and the more home you can buy for the same monthly payment amount.

Offer a Bigger Down Payment

If you're selling your current home and moving to a new one, it's a good idea to consider using the funds from the sale of your previous house toward the down payment on your new one. That way, you'll be able to take out a smaller mortgage, or even none at all.

Look to Other Retirement Income

If you're unable to qualify for a mortgage with your Social Security income alone, you may need to find an additional way to supplement it. One way to do so is by seeking out a part-time job to generate additional income, which you can document on your mortgage application.

The Bottom Line

While it is possible to get a mortgage using Social Security income alone, it's especially important to be careful. Make a budget so you know you'll have enough to pay your mortgage and other expenses, including emergencies. That way, when it comes time to replace a roof or pay for something unexpected, such as a pricey septic-tank repair, you'll be able to pay these expenses without any additional stress.

Frequently Asked Questions (FAQs)

How do I apply for Social Security retirement benefits?

You can apply for Social Security Benefits on the Social Security Administration's website, or by calling 1-800-772-1213.

How much of Social Security income is taxable?

The amount of tax you’ll pay on your Social Security income depends on how you file your taxes and the total amount of  Social Security and any other income. Depending on these factors, you might not have to pay taxes on your Social Security income at all, but most people will need to pay taxes on either 50% or 85% of that income.

What is the average Social Security income?

In August 2021, the average monthly Social Security payment for retired workers was $1,559. Survivors receiving Social Security earned an average of $1,250 per month.

Article Sources

  1. Federal Trade Commission. "Your Equal Credit Opportunity Rights." Accessed Oct. 13, 2021.

  2. Fannie Mae. "What Are the Requirements for Using Social Security Income?" Accessed Oct. 13, 2021.

  3. Office of the Assistant Secretary for Planning and Education. "Poverty Guidelines." Accessed Oct. 13, 2021.

  4. Consumer Financial Protection Bureau. "Summary of the Ability-To-Repay and Qualified Mortgage Rule and the Concurrent Proposal." Page 5. Accessed Oct. 13, 2021.

  5. U.S. Department of Housing and Urban Development. "FHA Single Family Housing Policy Handbook." Page 339. Accessed Oct. 13, 2021.

  6. Social Security Administration. "Effect of Early or Delayed Retirement on Retirement Benefits." Accessed Oct. 13, 2021.

  7. Social Security Administration. "Income Taxes And Your Social Security Benefit." Accessed Oct. 13, 2021.

  8. Social Security Administration. "Monthly Statistical Snapshot, August 2021." Accessed Oct. 13, 2021.