While most people assume that once they retire they no longer have the income to support a mortgage, this is no longer true. In fact, some who retire have saved enough to make a fairly large down payment or even pay for a home in cash. Even these individuals may want to apply for a mortgage, though, because it will allow them to stretch their assets further and deduct their mortgage insurance from their taxes.
Fortunately, even though it requires some different paperwork and qualifications, it is no more difficult to get a mortgage post-retirement than while the borrower is still working. There are special guidelines in place to help those who have retired to qualify for a mortgage.
Those who receive a pension or Social Security can count that as income, while others may continue to work part-time or do consulting work, which can also be counted. Often, lenders may consider the income of the entire household, not just the applicant. For example, if a borrower has one of their adult children living with them, that income can also be considered as part of the household income, as can any rental income.
According to Fannie Mae, lenders also need to look at the source of the borrower's income to see if it is taxable. Non-taxable income can be adjusted upward, giving the borrower a better chance of qualifying for a mortgage.