Yes. Social Security retirement, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) all count as income for a mortgage, the same as a paycheck does. Since these benefits are usually untaxed, lenders get to count them at more than face value.
The gross-up: why a benefit counts for more
Lenders measure a paycheck before taxes. A benefit that isn't taxed would look smaller than an equal paycheck, so the programs adjust for it. FHA lets the lender gross up non-taxable income by 15%, and Fannie Mae's Selling Guide adds 25% on Conventional loans.
SSI is never taxed. Social Security retirement and SSDI can become partly taxable once household income passes the thresholds in IRS Publication 915, so the lender grosses up only the part that isn't taxed. For buyers who live mainly on benefits, that's usually the whole amount.
| Monthly benefit | Counts on FHA (15%) | Counts on Conventional (25%) |
|---|---|---|
| $1,000 | $1,150 | $1,250 |
| $1,500 | $1,725 | $1,875 |
| $2,000 | $2,300 | $2,500 |
The lender documents the benefit with your award letter, the yearly notice from the Social Security Administration showing the monthly amount, plus bank statements showing the deposits. Benefits paid on your own work record, such as retirement or SSDI, are treated as continuing. Benefits paid on someone else's record, such as survivor benefits or a child's benefit, have to continue for at least three years from the application. A child's benefit generally stops at 18, or 19 for a student still in high school, so a benefit paid for a 16-year-old usually won't count.
A worked example: one paycheck plus SSDI
A married couple applies together. One spouse earns $3,200 a month in wages, and the other receives $1,500 a month in SSDI, none of it taxable. They pay $250 a month on a car.
| FHA | Conventional | |
|---|---|---|
| SSDI as counted | $1,725 | $1,875 |
| Total qualifying income | $4,925 | $5,075 |
| Housing limit | $2,309.83 (46.9%) | No separate limit |
| Total debt limit, minus the $250 car | $2,552.33 (56.9%) | $2,287.50 (50%) |
| Maximum house payment | $2,309.83 | $2,287.50 |
On FHA, $2,309.83 covers a $300,000 single-family home at 3.5% down and a 5.75% rate on a 30-year fixed: $1,719.01 principal and interest, $132.69 mortgage insurance, $212.50 property taxes at 0.85% a year and $240 homeowners insurance, $2,304.20 in all. FHA comes out ahead here even with its smaller gross-up, because FHA allows the higher total debt ratio. Conventional also needs a 620 score, while FHA starts at 580 for 3.5% down.
How each program treats benefit income
- FHA: Counts retirement, SSDI and SSI, grosses up the untaxed part 15%, and allows 46.9% for housing and 56.9% total with an automated approval.
- Conventional: Counts all three with a 25% gross-up and a total ratio up to 50%, from a 620 score.
- VA: Counts benefits as income and judges the loan on residual income, the money left each month after the house payment, debts, taxes and family living costs. Untaxed benefits help here, because less of each dollar goes to taxes.
- USDA: Counts benefits, with 29% housing and 41% total ratios. USDA's household income limits include the income of every adult in the home.
When the benefit needs help
A benefit-only buyer often adds a second income to reach Florida prices. These are the usual ways to do it:
- A spouse or partner on the loan, as in the example above.
- A co-signer. On FHA, a non-occupant co-borrower, often a parent or a sibling, adds income and doesn't go on the title or live in the home. The co-signer calculator shows how much a co-signer adds.
- A 2 to 4 unit home. You live in one unit and rent the others, and 75% of the other units' rent counts as income. The house hacking guide runs the numbers.
- FHA 100% financing. SSI caps countable savings at $2,000 for an individual, but the home you live in isn't counted. A down payment assistance second that covers the 3.5%, plus seller-paid closing costs up to 6% of the price, keeps the cash you need to a minimum.
Keep your award letter handy and call AAA Capital Funding at 888-601-8344. We'll gross up your benefit for each program and show you the price it supports, with and without a co-signer.