Even if your only source of income is Social Security payments, you may still be able to qualify for a mortgage after you've reached retirement age. People often believe they won't qualify just because they are receiving Social Security, but in this situation, the law will protect you even if they believe otherwise. The Equal Credit Opportunity Act prohibits lending institutions from discriminating against borrowers based on several factors, including the borrower's age and the borrower's receipt of public assistance, such as Social Security.

However, the fact that you are getting a fixed income from Social Security does not always imply that you are automatically given priority when applying for a mortgage. You will still be required to go through the typical steps of applying for and getting approved for a mortgage. This is where things have the potential to get problematic.

The income from Social Security, by itself, is often not a very big payout. The average monthly payment received by retirees in August 2021 was $1,559, which placed them at $5,828 more annually than the federal poverty level for a person. Your total monthly debt obligations, including the mortgage payment, cannot exceed 43% of your income before a lender considers approving your application for a mortgage loan.

This is referred to as the back-end debt-to-income ratio, and it indicates that for the typical retiree to be eligible for a mortgage, the monthly payment amount would need to be at least $670, supposing that they do not have any other obligations. In many parts of the nation, finding a property with mortgage payments that are so low might be difficult unless the prospective buyer has sufficient cash on hand to make a higher down payment.

How Much Will You Get on Social Security?

The amount of money you'll get from Social Security when you retire is mostly determined by the amount of money you made while you were working and the retirement on which you began receiving benefits from the program. When calculating your Social Security benefit, the Social Security Administration considers the 35 years you earned the most and takes an average of those years.

You are permitted to apply for benefits as soon as you reach the age of 62, but if you do so, 25% of your regular salary will be withheld for the remainder of your life. If you put off applying for benefits until you reach the full retirement age of 67 (this applies to anyone born after 1960), you will be eligible to receive the maximum amount. If you wait even longer, up to the age of 70, you will be eligible for a credit that may increase the amount you get from Social Security by 24% per month.

How To Qualify for a Loan on Only Social Security

It won't be simple to qualify for a mortgage based only on your Social Security income. Still, there are several things you can do to increase the likelihood of doing so successfully.

Reduce Debts

If you can do so, paying off any other obligations you may have will increase the likelihood that you will be approved for the mortgage you seek. Any portion of your previous debt you pay off brings the maximum amount you may borrow for a mortgage closer to the cap, which is normally set at 43 percent of your annual income.

Improve Credit

A person's ability to purchase a certain property is also impacted by their credit score; this is particularly true for those who rely on Social Security as their primary source of income. A better credit score will often result in a reduced interest rate, resulting in more purchasing power. Your application for a loan will also take into consideration your credit score. To put it another way, if your credit is better, your interest rate will be cheaper, and you'll be able to purchase a larger property while maintaining the same monthly payment amount.

Offer a Bigger Down Payment

It is smart to consider utilizing the money from the sale of your previous property toward the down payment on your new home if you are planning on relocating after selling the home you are currently living in and purchasing a new one. In this manner, you will be able to get a mortgage with a lower interest rate, or maybe none at all.