Qualifying for a Mortgage on Retirement Income in Arizona
How lenders treat Social Security, pensions, annuities and retirement accounts as qualifying income, what documents you need, and how DTI works on a fixed income.
IRA distributions, pensions, annuities and Social Security benefits may be accepted as qualifying income under Fannie Mae guidelines, with fixed payment streams requiring no minimum income history and variable income needing at least 12 months of receipt, and lenders must verify the income will continue for at least three years from the note date.
Income received from IRA distributions, pensions, annuities and Social Security benefits may be accepted as qualifying income under Fannie Mae guidelines, and retirement, pension and annuity income must be documented with evidence such as a statement from the organization providing the income or a copy of a retirement award letter or benefit statement. Fannie Mae requires no minimum income history for fixed payment streams, while variable income must show at least 12 months of receipt, and lenders must verify the income will continue for at least three years from the note date. For manually underwritten loans, Fannie Mae's maximum total debt-to-income ratio is 36% of stable monthly income, which can be exceeded up to 45% if the borrower meets the credit score and reserve requirements in the Eligibility Matrix; for loan casefiles underwritten through Desktop Underwriter, the maximum allowable ratio is 50%.
Qualifying on retirement income means proving to a lender that the money you live on is documented, recurring, and likely to keep arriving. A W-2 borrower proves this with pay stubs and an employer. You prove it with award letters, benefit statements, account statements, and in some cases a calculation that converts a pool of assets into a monthly income figure.
This matters locally because of who is buying here. Victory at Verrado is the Active Adult 55+ community within Verrado. Most of the people I work with in that segment are financing against retirement income rather than a paycheck.
The retirement income types a lender will count
Fannie Mae accepts income received from IRA distributions, pensions, annuities and Social Security benefits as qualifying income. Fannie Mae sets requirements for annuity income, whether government, personal, or insurance, along with pension and retirement income. Social Security income has its own topic, B3-3.4-15, and for it the lender must obtain evidence of regular receipt of payments, with acceptable verification depending on the benefit type and on whether the beneficiary is the borrower or another person.
Two mechanics inside that acceptance are worth knowing before you apply.
The nontaxable portion of recurring retirement income must be added to your cash flow, and the tax-exempt portion may be increased, or "grossed up," to reflect the tax savings. That raises the income figure a lender uses without changing the deposit hitting your bank account.
If income from these sources is determined to be nonrecurring, it must be deducted from your cash flow. A one-time IRA withdrawal is not income for qualifying purposes.
How a lender turns assets into monthly qualifying income
When you have retirement accounts but no regular distribution, two paths exist.
Fannie Mae sets requirements for employment-related assets that may be used as qualifying income. If a loan does not meet those parameters, the assets may still be eligible under other income guidelines, such as interest and dividend income or annuity, pension, or retirement income. The calculation subtracts penalties, the down payment, closing costs and required reserves from eligible assets before dividing by the loan months to produce a monthly figure. Checking and savings balances are generally not eligible unless sourced from an eligible employment-related payout. Unvested restricted stock units and options, lawsuit and lottery proceeds, real estate sale proceeds, inheritance and virtual currency are all ineligible.
Freddie Mac handles this under Guide Section 5307.1. Assets may only be used to qualify a borrower if the mortgage is secured by a one or two unit primary residence or a second home, is a purchase, "no cash-out" refinance, or Enhanced Relief Refinance mortgage, and has a maximum loan-to-value ratio of 80%. Under that section, net eligible assets are divided by 240 to establish the debt payment-to-income ratio, and net eligible assets are calculated by subtracting funds the borrower must pay to complete the transaction, such as down payment and closing costs. Freddie Mac removed the borrower age restriction that applied to depository accounts and securities used under this section, so you do not have to be retirement age for checking, savings, money market, stocks or bonds to be considered. Freddie Mac's Section 5307.1 also states the loan file should include information on your employment and income even when you qualify solely on assets.
Freddie Mac Bulletin 2026-10, issued August 5, 2026, substantially rewrites Section 5307.1, and it carries an optional implementation window between August 5, 2026 and February 3, 2027. During that window, two Freddie Mac sellers can quote you different qualifying incomes because one has adopted the new divisor and the other has not. If you are qualifying on assets in this period, ask each lender which version of Section 5307.1 they are underwriting to before you compare their numbers.
One more structural difference: Fannie Mae subtracts required reserves from the asset pool before dividing, while Freddie Mac's subtraction step covers funds to complete the transaction, gift and borrowed funds, and pledged or encumbered amounts, with reserves absent from that list.
The documents a retiree files that a W-2 borrower does not
Fannie Mae requires retirement, pension and annuity income to be documented with acceptable evidence such as a statement from the organization providing the income, or a copy of a retirement award letter or benefit statement. If you will begin receiving payments on or before the first mortgage payment date, the income must be documented with a benefit statement specifying income type, amount, frequency, and the initial start date. Fannie Mae requires proof of receipt of retirement income prior to loan closing.
For Social Security, a Fannie Mae announcement dated October 2022 allows, in addition to the Social Security Administration's award letter or proof of current receipt, the SSA-1099 or the most recent signed federal income tax returns or tax transcripts as adequate documentation of retirement or disability benefits.
The practical assembly job before you apply:
- The award letter or benefit statement for each pension and annuity, showing income type, amount, frequency and start date
- Proof you are actually receiving the payments, since Fannie Mae requires proof of receipt prior to loan closing
- For Social Security, the SSA award letter, proof of current receipt, the SSA-1099, or your most recent signed federal returns or tax transcripts
- Account statements for any retirement accounts you intend to use as the basis for qualifying income
Why fixed and variable distributions are underwritten differently
Fannie Mae sets no minimum income history for fixed payment streams. Variable income must show at least 12 months of receipt. Qualifying income is determined using the documented monthly amount for fixed payments, or a 12-month average for variable income.
Lenders must review the documents obtained to determine whether distributions are fixed or variable in nature, and if the lender is unsure, may need additional historical documentation. If your withdrawals have moved around year to year, gather more history than you think you need, because the file will be averaged over 12 months rather than read at its best month.
Continuation is the other test. Lenders must verify the income will continue for at least three years from the note date, which may involve reviewing written agreements, program rules, or retirement account balances you can access without restriction. Where income has a defined expiration date, or depends on depletion of an asset account, Fannie Mae requires it be documented as continuing at least three years from the note date, and when an asset account is the sole or majority source of qualifying income, the lender must assess your ability to keep repaying once the asset is depleted.
If you are still working and retirement is pending, say so early. When a lender is notified that a borrower is transitioning to a lower pay structure, for example due to pending retirement, the lender must qualify using the lower income amount and determine it is stable and predictable.
How debt-to-income works once the paycheck stops
For manually underwritten loans, the maximum total ratio is 36% of stable monthly income, which can be exceeded up to 45% when the borrower meets the credit score and reserve requirements in Fannie Mae's Eligibility Matrix. Through Desktop Underwriter, the maximum allowable ratio is 50%. Fannie Mae's Eligibility Matrix states that minimum reserves apply to Desktop Underwriter loan casefiles with debt-to-income ratios exceeding 45% on cash-out refinances.
What counts on the obligations side of that fraction: the housing payment on each borrower's principal residence, principal, interest, taxes, insurance and association dues on the subject property, installment and mortgage debts with more than ten monthly payments remaining, short-term debts of ten months or fewer when they significantly affect ability to pay, revolving debt monthly payments, lease payments regardless of expiration date, and alimony, child support or maintenance extending beyond ten months.
Two things follow for a fixed-income borrower. A car lease counts no matter how close it is to ending, so paying it off before application changes the ratio in a way that waiting does not.
Fannie Mae also acknowledges that lenders may apply a more conservative approach when qualifying borrowers, which is acceptable as long as Fannie Mae's minimum requirements are met and the approach is applied consistently to similar loans. Two lenders can therefore look at identical retirement income and reach different answers. If one lender declines, the file is worth a second reading elsewhere.
If you disclose additional debt or reduced income after the underwriting decision and up to loan closing, the lender must document that additional debt and reduced income under Fannie Mae's liability and income assessment rules. Do not open a new account or restructure a distribution between approval and closing.
What this means for buying in Verrado and the surrounding West Valley
Verrado is a planned community in the City of Buckeye, Maricopa County, Arizona. It includes a public golf course, a private health club, two public elementary schools, a middle school, a high school, and the Victory District for older residents.
The RPR figures for June 2026 give you the numbers to size a loan against:
| Market | Median sold price | Homes for sale | Days on market | Months of supply | Share of asking price |
|---|---|---|---|---|---|
| Verrado (Buckeye) | $543,000 | 193 | 47 | 5.22 | 98.48% |
| Pebblecreek (Goodyear) | $600,000 | 60 | 47 | 2.4 | 98.54% |
| Litchfield Park | $550,000 | 276 | 47 | 5.02 | 97.7% |
| Goodyear (city-wide) | $481,600 | 681 | 55 | 3.85 | 98.61% |
| Sun City Grand (Surprise) | $425,000 | 152 | 77 | 3.53 | 97.68% |
Months of supply is how long it would take to sell every home currently listed at the current pace; six months is generally considered balanced. Days on market is the median time from listing to going under contract.
In a market closing at 98.48% of asking price, plan your financing around near-ask pricing rather than around a discount. In Pebblecreek, at 2.4 months of supply, a full underwriting approval before you shop is the difference between making an offer and watching one.
Sold homes in Verrado traded at $264 per square foot in June 2026, the sale price divided by the home's finished square footage, on a median of 51 homes sold.
The Bottom Line
Retirement income qualifies for a mortgage when it is documented, recurring and provable for three years forward. Fannie Mae accepts IRA distributions, pensions, annuities and Social Security, requires an award letter or benefit statement plus proof of receipt before closing, applies no minimum history to fixed payment streams, and averages variable income over 12 months. The ratio ceilings are 36% manually underwritten, up to 45% with the credit score and reserve requirements in the Eligibility Matrix, and 50% through Desktop Underwriter. Get the documentation assembled before you shop, because in Verrado at 5.22 months of supply and 98.48% of asking price as of June 2026, the strength of your file is what makes your offer readable to a seller.
If you are planning a purchase or a move in Verrado, Buckeye, Litchfield Park or Goodyear on retirement income, reach out and I will help you line up the market numbers and the documentation before you write an offer.
Written by Will McRorie, part of the Kristan Cole Network team.
Sources
Pages read on September 28, 2026.
- Fannie Mae: Annuity, Pension, or Retirement Income
- Fannie Mae: Social Security Income
- Fannie Mae: Media
- Fannie Mae: Employment Related Assets as Qualifying Income
- Fannie Mae: B3-6-02, Debt-to-Income Ratios (04/02/2025)
- Fannie Mae: Media
- Freddie Mac: Section 5307.1
FAQ
Can I use Social Security to qualify for a mortgage?
Yes. Fannie Mae accepts Social Security benefits as qualifying income, and the lender must obtain evidence of regular receipt of payments, with acceptable verification depending on the benefit type and whether the beneficiary is the borrower or another person. Under a Fannie Mae announcement dated October 2022, the SSA-1099 or the most recent signed federal income tax returns or tax transcripts are adequate documentation of retirement or disability benefits, in addition to the Social Security Administration's award letter or proof of current receipt.
What documents do I need to qualify for a mortgage on pension or annuity income?
Fannie Mae requires retirement, pension and annuity income to be documented with acceptable evidence such as a statement from the organization providing the income, or a copy of a retirement award letter or benefit statement. If you will begin receiving payments on or before the first mortgage payment date, the income must be documented with a benefit statement specifying income type, amount, frequency and the initial start date. Proof of receipt of retirement income is required prior to loan closing.
How long does retirement income have to continue for a lender to count it?
Lenders must verify the income will continue for at least three years from the note date, which may involve reviewing written agreements, program rules, or retirement account balances the borrower can access without restriction. Where income has a defined expiration date or depends on the depletion of an asset account, Fannie Mae requires the same three-year documentation, and when an asset account is the sole or majority source of qualifying income the lender must assess the borrower's ability to keep repaying once the asset is depleted.
What debt-to-income ratio can I have on a fixed income?
For manually underwritten loans, Fannie Mae's maximum total debt-to-income ratio is 36% of stable monthly income, which can be exceeded up to 45% if the borrower meets the credit score and reserve requirements in the Eligibility Matrix. For loan casefiles underwritten through Desktop Underwriter, the maximum allowable ratio is 50%. Fannie Mae's Eligibility Matrix states that minimum reserves apply to Desktop Underwriter casefiles with ratios exceeding 45% on cash-out refinances.
Do my IRA withdrawals need a history before a lender will use them?
It depends on whether the distributions are fixed or variable. Fannie Mae requires no minimum income history for fixed payment streams, but variable income must show at least 12 months of receipt, and qualifying income is the documented monthly amount for fixed payments or a 12-month average for variable income. Lenders must review the documents obtained to decide which category applies, and may request additional historical documentation if they are unsure.
Can I qualify for a mortgage using retirement assets instead of monthly income?
Yes, under both agencies, with different rules. Fannie Mae sets requirements for employment-related assets used as qualifying income, and if a loan does not meet those parameters the assets may still be eligible under other income guidelines such as interest and dividend income or annuity, pension, or retirement income. Freddie Mac permits assets to qualify a borrower only on a one or two unit primary residence or second home, for a purchase, no cash-out refinance, or Enhanced Relief Refinance mortgage, with a maximum loan-to-value ratio of 80%.
