Retirement income counts, and more of it than people expect
A common assumption among people leaving work is that not having a job means not qualifying. That is generally not the case, and the misunderstanding costs people the house they wanted.
- Social Security is qualifying income, and because it is partly or wholly non-taxable it can often be grossed up, which raises the figure the lender uses.
- Pension income counts with documentation showing it continues.
- Retirement account distributions count where there is a history of taking them and sufficient balance for them to continue, typically three years forward.
- Investment and dividend income counts with a two year history.
The gross-up on non-taxable income is the one most often missed. Someone drawing Social Security may qualify for a meaningfully larger loan than they assume, purely because the lender is permitted to use a higher figure than the deposit amount for non-taxable income.
When you have assets but not much income
The harder version is someone with substantial retirement savings who is not yet drawing on them, or drawing very little. On paper the monthly income looks thin even though the balance sheet is strong.
Asset depletion is built for exactly this. The lender takes qualifying liquid assets, applies their formula, and converts the balance into a monthly income figure for qualifying purposes. You are not required to actually start taking distributions, which matters if you have tax reasons for waiting.
Eligible account types and the calculation method vary enough between lenders to change your approval significantly, so this is one to shop deliberately. It is also underused, because plenty of loan officers never bring it up.
Buying here before selling there
The most common practical problem in this market is sequencing. You want the Arroyo Grande house. Your equity is still sitting in the house you are leaving. Selling first means moving twice or renting in between, and buying first means carrying two mortgages on paper.
There are a few ways through it and they suit different situations.
- Qualify carrying both. Cleanest when the income supports it. No bridge product, no extra cost, and your offer is not contingent on anything.
- A HELOC on the departing residence, opened before you list it. Draw the down payment, buy, then pay the line off at closing. The critical part is that you generally cannot open a line on a house already listed for sale, so this has to be set up early.
- Short-term bridge financing, which costs more and is the right answer when the timeline genuinely will not cooperate.
- Rent-back from your buyer, which is a negotiation rather than a loan product but frequently solves it for free.
The HELOC route is the one people find out about too late. If there is any chance you will want it, open the line while the house is still simply your home.
Single-story, condition, and the loan you choose
Downsizing buyers here frequently want single-story, which is in shorter supply than demand would suggest, so competition on those properties runs hotter than the overall market.
Housing stock is mixed in age, and where you are looking at an older home, the loan product interacts with condition. FHA and VA appraisals apply minimum property standards that conventional appraisals do not, which on a house with deferred maintenance can turn into conditions requiring correction before closing.
For a buyer with equity from a prior home, conventional financing is usually both available and simpler on an older property. Worth knowing before you choose a product on down payment alone.
Arroyo Grande and Five Cities FAQ
I am retired. Can I still get a mortgage?
Yes, and usually for more than people assume. Social Security, pension, retirement account distributions and investment income all qualify with documentation. Non-taxable income such as Social Security can often be grossed up, meaning the lender uses a higher figure than what lands in your account. Age itself is not a factor in the decision, and cannot be.
I have savings but I am not taking distributions yet. What then?
Asset depletion is likely the right program. The lender converts your qualifying liquid assets into a monthly income figure using their formula, without requiring you to actually begin taking distributions. That matters if you have tax reasons to wait. Eligible accounts and calculation methods vary enough between lenders that it is worth shopping specifically rather than accepting the first answer.
How do I buy here before selling my current home?
Four routes, depending on your situation. Qualify carrying both mortgages if the income supports it, which is cleanest. Open a HELOC on your current home before listing it and use the draw as your down payment. Use short-term bridge financing, which costs more. Or negotiate a rent-back from your buyer. The HELOC route needs setting up early, because you generally cannot open a line on a home already listed for sale.
Is a reverse mortgage my only option at my age?
Not remotely, and it is worth saying plainly because people are often steered there by default. A reverse mortgage is one product among several and it fits a specific set of circumstances. If your income and assets support a conventional loan, a conventional loan is usually the better instrument. I would rather show you the comparison than let the assumption make the decision.
Does my age affect whether I qualify?
No. Lenders cannot consider age in the credit decision. What they consider is whether your income is expected to continue, which is why documentation showing pension or distribution continuance matters. That is a question about the income, not about you.
Should I pay cash or take a loan?
It depends on what the money is doing otherwise and on your tax position. Paying cash removes a payment and simplifies your life. Financing keeps the capital invested and preserves liquidity, which matters more in retirement than people expect. There is no universal answer, and anyone who gives you one without asking about your situation is not really answering.