The short version
A lender doesn't need your income to come from a job. A pension works fine. What they care about is that it's documented, stable, and likely to keep coming for at least the next few years. Social Security, pensions, annuities, and regular IRA or 401(k) distributions all count as qualifying income.
If your income is modest but your savings aren't, there's a second path: asset-based qualifying, sometimes called asset depletion. The lender turns a portion of your investment and retirement balances into a monthly income figure on paper. You don't have to actually withdraw it.
And no — you're not too old. Federal fair-lending law bars lenders from turning you down because of your age, and a 30-year loan at 72 is completely normal. I've closed them.
What retirement income counts toward a mortgage?
Pretty much all of it, as long as there's a paper trail. For Social Security and pensions, that's usually an award letter plus a bank statement showing the deposit. For IRA and 401(k) draws, it's account statements and proof the distribution is set up and recurring.
One detail that helps a lot of retirees: income that isn't taxed can often be 'grossed up' for qualifying. If part of your Social Security is non-taxable, the lender may be able to count it at a higher figure than what actually hits your account, because a paycheck of the same size would be taxed. The exact gross-up depends on the loan program and your tax return — verify it for your scenario.
Where people trip up is continuance. Retirement account distributions generally need to be supported for at least three years going forward. If you've got $90,000 in an IRA and you're drawing $4,000 a month, that math doesn't hold up for three years, and the underwriter will notice.
- Social Security: award letter (SSA-1099 or benefit statement) and proof of deposit
- Pension or annuity: award letter or contract showing the amount and terms
- IRA/401(k) draws: recent statements and proof the distribution is established
- Rental income, part-time or consulting income, and dividends can be layered on top
- Required minimum distributions count too, once you're taking them
How does an asset depletion loan work?
Say you're 68, you sold a business, and your only fixed income is $3,100 a month of Social Security. On paper that's not enough to buy much in Santa Rosa. But you've got $1.4 million sitting in brokerage and retirement accounts. It'd be strange for a lender to call you unqualified.
Asset depletion solves that. The lender takes eligible assets, sometimes applies a discount to retirement accounts or volatile holdings, subtracts your down payment and closing costs, and divides what's left over a set number of months. That monthly figure gets treated like income.
The divisor matters a lot, and it varies. Some agency guidelines use the loan term, which spreads the assets thin. Many non-QM lenders use a shorter period, which produces a much bigger income number from the same balance. Those loans usually price a bit higher than conventional, but for the right file they're the difference between a yes and a no. Rules and rates change, so treat anything you read here as approximate and get it priced against your actual statements.
Should I pay cash or take a mortgage in retirement?
I don't push retirees into debt. If paying cash leaves you with a comfortable cushion and you sleep better owning the house free and clear, that's a perfectly good answer.
But I've seen this go sideways. A couple in their seventies liquidated a big chunk of an IRA to buy a place in Sonoma outright, and the withdrawal pushed them into a much higher tax bracket that year. It also bumped up their Medicare premiums. A mortgage would've cost them less than the tax bill did.
The other reason to finance is liquidity. Once cash goes into a house, getting it back out means borrowing anyway, and qualifying for a cash-out refinance later can be harder than qualifying for a purchase loan now. Talk to your CPA or financial planner before you pull a big number out of a retirement account. That's their lane, not mine, but it's the most expensive mistake I see.
What if I already bought with cash?
There's a tool for that. It's called delayed financing, and it lets you buy with cash and then take out a mortgage shortly after closing, usually within six months, to pull some of that money back out. You avoid the usual waiting period that applies to cash-out refinances.
This works well when you're competing for a house. In Healdsburg or Sonoma, an all-cash offer with a quick close can beat a higher financed offer. Win the house with cash, then refinance to restore your reserves. The paper trail on where the cash came from has to be clean, so plan it with your lender before you write the offer, not after.
What should Sonoma County retirees watch for?
Downsizing is the most common scenario I see. Folks selling a family home in Petaluma or Windsor and moving to a single-level place, often in Oakmont. A few local things are worth knowing before you shop.
If you're buying before you've sold, you'll need to qualify carrying both housing payments for a while, or use a bridge loan. Oakmont and other 55+ communities come with HOA dues that count against your debt-to-income ratio, and if the property is a condo, the project has to pass lender review. Fire-zone insurance is the other one. Get a quote on the specific address early, especially in the hills east of Santa Rosa or out toward Glen Ellen.
- Prop 19 may let homeowners 55+ carry their old property tax base to a replacement home in California. Confirm eligibility with the county assessor.
- HOA dues count in your ratios, so a high-dues community shrinks your buying power
- Condos in older projects can hit review problems; check before you fall in love
- Insurance quotes on wildfire-exposed parcels can swing a payment by hundreds a month
- A HECM for Purchase is a separate option if you'd rather have no monthly mortgage payment at all