Can you get a mortgage when retired? Types and considerations

While many people wonder if retirement affects their ability to buy a home, employment status and income type won’t impact the process. Retirees have access to the same mortgage types as everyone else. 

Whether it’s conventional, cash-out refinancing, or a VA loan, you can secure a mortgage and great terms if you have a strong credit history and reliable income.

This article explores how you can get a mortgage when retired and the best options depending on your circumstances. Plus, find out how Better streamlines the process of obtaining a mortgage in retirement, even if you’re working with less traditional income sources.

...in as little as 3 minutes – no credit impact

Can retired individuals qualify for a mortgage?

Yes, retirees are eligible for mortgages, just the same as workers earning a wage. What matters most to lenders is your ability to repay the loan, not your current employment status. As long as you have a decent credit profile and some kind of income that lets you cover the mortgage payments, your application as a retiree is just as valid as anyone else’s.

However, some lenders look more closely at retirees’ financial profiles than other buyers, especially if they have a fixed income. 

Inflation doesn’t affect these types of cash flow, which could be an interest rate or default risk for the provider. This doesn’t necessarily mean there will be any issues, though — securing a loan might be as simple as providing the lender with extra documentation or raising your credit score.

What’s a retirement mortgage?

There’s no special mortgage for retirees — all standard types of loans are still available after you stop working. Still, some lenders have more experience working with retired borrowers and are comfortable processing nontraditional profiles. For instance, these professionals may look beyond a lower monthly income and consider other assets like stocks and retirement funds.

When shopping around for mortgages as a retiree, read reviews or call loan providers to find businesses that focus on the borrower’s overall ability to pay, not their job. You can also look for common signs that a lender is retirement-friendly, like advertising reverse mortgages, an option only available to people over 62. 

You’re free to review as many companies as you like before settling on one — you can even switch mortgage lenders once you’re under contract as long as you haven’t signed the closing documents yet.

What factors do lenders consider for a retired person seeking a mortgage?

When evaluating a retiree for a mortgage, lenders look at the same factors as any potential buyer, including the following.

Income

While retirees no longer make money from a typical 9-to-5 shift, they still earn an income. Here’s a summary of the most common types of income retirees use to secure a loan and the paperwork lenders may require:

Income type	Associated paperwork
Social Security	- Social Security benefit verification letter - Recent bank statements showing receipt of Social Security income
Pension	- A company statement providing income - IRS W-2 or 1099 - Copy of the pension verification letter or retirement benefits statement - Recent bank statements showing receipt of pension income - Your most recent tax return
Retirement accounts (401(k), IRA, etc.)	- Statement from issuing company - Recent bank statements showing regular ongoing withdrawals - Account statement showing the balance is sufficient to sustain payments for three years - One to two years of tax returns
Annuities	- Recent bank statements showing receipt of annuity income - Two years of tax returns
Long-term disability income	- Proof of eligibility for disability benefits - Statements documenting how much and how often benefits are paid - Confirmation that there’s no end date to the income
Interest and dividends	- Recent bank statements showing receipt of income from interest and dividends - Two years of tax returns
Rental property income	- Current lease agreement - One to two years of tax returns

Credit score

The higher your credit score, the better loan terms and interest rates you can access. So, before shopping around for lenders, pull your credit report and double-check for reporting mistakes or discrepancies. If you find any, notify the credit bureaus right away so your score is in the best possible shape for landing competitive loan terms.

Expert tip: Never pay to view your credit report. The three credit bureaus — Equifax, Experian, and TransUnion — now offer one free report per bureau weekly, rather than the previous annual program, so checking your score is much more flexible. You can request them at AnnualCreditReport.com. 

Don’t worry about checking often, as reviewing your own credit score is a soft pull and won’t lower it.

Debt-to-income ratio

Your debt-to-income (DTI) ratio is the percentage of your income that goes toward paying off your existing debts. Many lenders prefer a debt-to-income ratio below 43%, though some will consider up to 50%.

To calculate your DTI, divide your monthly debt payments by your gross monthly income, then multiply the number by 100 to get a percentage. Suppose you have a monthly income of $5,000 from a combination of Social Security, annuities, and an IRA. If your monthly debt payments are $2,000 dollars, you can calculate your debt-to-income ratio like this:

$2,000 / $5,000 = 0.4 = 40%

What are the options for mortgages during retirement?

Here are some of the main types of mortgages for retired persons.

Conventional loans

Conventional loans are the most common type of mortgage. They’re fairly flexible, with a range of term lengths, interest rate types, and down payment requirements: 

— Term lengths: Typically, these loans come in 15 and 30-year lengths, though some lenders offer custom durations where the borrower chooses a specific length.

— Common interest rates: Conventional loans often either have fixed interest rates that don’t change throughout the duration of the term or adjustable rates that fluctuate based on market conditions.

— Down payment percentages: Conventional loans usually require a 3–5% down payment.

At Better, we understand diverse needs, and we’ll work with you to find a mortgage option that fits your budget and financial goals. Start your pre-approval today in as little as three minutes to see how much home you can afford.

...in as little as 3 minutes – no credit impact

FHA loans

FHA loans are easier to obtain than conventional loans, with more lenient credit, DTI, and down payment requirements. The Federal Housing Administration insures the loan against default, reducing the lender’s overall risk and helping retirees with lower credit scores or monthly incomes qualify. Note that the FHA doesn’t provide these loans directly — you’ll still need to find a lender.

VA loans

VA loans are mortgages backed by The Department of Veterans Affairs (VA), and they help veterans, service members, and surviving spouses buy homes. To qualify, service members must serve in active duty for a certain period of time, most commonly 90 days or more. 

Eligible retirees often qualify with a 0% down payment, and the DTI ratio is flexible. While these other requirements are lighter, VA loans still need a decent credit score, and most lenders typically prefer a minimum score of 620.

USDA loans

If you’re buying a home in an eligible rural area and have low to moderate income, you may qualify for a U.S. Department of Agriculture (USDA) loan. The maximum eligible income is most often 115% of your area’s median annual household income. There’s no minimum down payment, and credit requirements are accommodating. If you have a lower credit score, most USDA lenders look for compensating factors like on-time rent payments or a low DTI.

Reverse mortgages

Reverse mortgages are especially relevant to retirees because they’re only available to borrowers aged 62 and older. To qualify, most lenders require you to have at least 50% equity in your home. 

These mortgages allow you to borrow against your equity without moving out. You don’t pay these mortgages off in monthly installments. Instead, the loan is due when the borrower moves, sells the property, or passes away.

Cash-out refinances

A cash-out refinance replaces your existing mortgage with a new one. Like traditional refinancing, they establish new terms and interest rates, but they also provide a lump sum of money borrowers often use to pay for renovations and debts. 

Many lenders require you to leave at least 20% equity in your home after the refinance to qualify. You can typically borrow up to 80% of your home’s value, though some lenders offer even more. Keep in mind that since you’re taking out a brand-new loan, you’ll have to cover closing costs.

Is having a mortgage in retirement the right choice?

A retired person can get a mortgage, but it isn’t for everyone. If you have a good credit profile, a solid income or portfolio of assets, or the right qualifications for a flexible mortgage, buying a home in retirement is a viable option. Just make sure you’re comfortable with the fees and mortgage payments and you aren’t saddling yourself with an overly heavy debt burden.

With Better, homeownership doesn’t end at retirement

Anyone can apply for a mortgage and pursue their dream home, retiree or not, and Better makes the process accessible to every buyer. Our online application takes as little as three minutes to complete — get pre-approved, find the right mortgage, and secure the ideal home faster. Better also provides 24/7 support, so you never have to worry about unanswered questions or frustrating roadblocks.

Get pre-approved with Better today to take the first step on your homeownership journey.

...in as little as 3 minutes – no credit impact