Social Security Income & Home Loans

Can borrowers use social security income for home loan approval?  Absolutely YES!  In fact, underwriters consider Social Security income very stable.

Social Security Income & Home Loan approval

Borrowers must meet certain criteria to use Social Security Income for mortgage approval.   The most basic are:

• Income continues for at 3+ years after mortgage funds
• Income received for 2+ months

Underwriters assume borrowers over 62 receive Social Security as retirement income.  Therefore the SS income lasts 3 +years.  However, borrowers below the age of 62 that get Social Security Income require a little more work.  For example, often a borrower receives SSI/Disability due to a disability.  In such a case, lenders must document the disability will persist for at least 3 years.

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Increasing (Grossing up) Social Security Income

Some clients receive a “bonus” when they use Security Income for mortgage approval.  Due to the fact Social Security Income is often non-taxable income, lenders may “gross up” SSI.  Borrowers not liable for income taxes on their Social Security income may have Social Security income inflated on their loan application.

Why?  Home loan approvals use a borrower’s gross income.  For example, a borrower that makes $60,000 gross per year get credit for $60,000 of income on their loan application.   However, most of us make do not actually take home our gross income.  Yet, lenders use our gross income when evaluating our creditworthiness.  Shouldn’t those earning Social Security have the same opportunity?

When it comes to Social Security Income the gross and net figures are often nearly the same.  Why should they be qualified on their take home when lenders use gross income for other types of income.  To be fair, Social Security income may be “grossed up” when the borrower does not pay Federal income taxes.

In addition, when a borrower is taxed on some of their Social Security income their mortgage lender may gross up the non-taxed portion of income.

Social Security Income for Mortgage Approval

As you can see Social Security is a great source of income that can be used to help a client qualify for an Arizona home loan.  The best way to document Social Security income is by providing your lender with:

1. Most recent copy of your Social Security Award Letter
2. Most recent 2 months bank statements showing 2 consecutive Social Security income deposits

If you have any questions regarding how to use Social Security income for mortgage approval please feel free to contact us.

By Jeremy House
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