Qualifying on Retirement Income
Social Security income, pension income, and regular IRA/401(k) distributions all count as qualifying income for a mortgage. Non-taxable Social Security income can be grossed up by 25% — if you receive $3,000/month in Social Security, lenders can count it as $3,750. Pension income counts at the documented amount. Required Minimum Distributions (RMDs) from retirement accounts are treated as recurring income if documented for at least 12 months.
Asset Depletion Programs
If you have substantial savings and investments but limited monthly income, asset depletion (also called asset dissipation) programs calculate qualifying income from your total liquid assets. The formula typically divides your eligible assets by 240 or 360 months to create a monthly income figure. For example, $1,000,000 in a brokerage account divided by 360 = $2,778/month qualifying income. Eligible assets include checking/savings, stocks, bonds, mutual funds, and retirement accounts (discounted by 30% for tax impact).
Reverse Mortgages
Homeowners 62 and older can access home equity through a reverse mortgage (HECM) without making monthly mortgage payments. You retain ownership and can live in the home. The loan is repaid when you sell, move out, or pass away. Reverse mortgages can eliminate existing mortgage payments, provide a monthly income stream, or give access to a line of credit that grows over time. California's high home values make reverse mortgages particularly powerful — equity of $500,000+ is common.
Downsizing Strategies in California
Many California retirees sell a high-value home and purchase something smaller, generating significant proceeds. Proposition 19 (passed in 2020) allows homeowners 55+ to transfer their property tax base to a new home anywhere in California — a major benefit in a state with high property taxes. When buying the replacement home, the proceeds from the sale plus retirement income provide strong qualification. Save Financial helps retirees structure the transaction for maximum purchasing power.
Expert Contributor
Mike Baasti, Licensed Mortgage Broker
Expert contributor to Mortgage Guide California. Licensed mortgage broker (Sponsored by Save Financial, Inc. (NMLS #377740), DRE #01875766) and founder of Save Financial, Inc. in Newport Beach, CA. 20+ years originating conventional, FHA, VA, jumbo, and specialty loans across California.