Can Retirement Accounts Be Used as Income to Qualify for a Mortgage?

Updated September 2026

Yes, retirement accounts can sometimes help you qualify for a mortgage—even if you are not currently taking withdrawals from those accounts.

There are two primary ways retirement assets may be treated as qualifying income:

1. Regular retirement distributions: You are already receiving recurring payments from an IRA, 401(k), pension, annuity or other retirement account.
2. Accumulated assets as income: The lender converts a portion of your eligible assets into a calculated monthly income amount for mortgage-qualifying purposes.

These are different underwriting methods with different requirements. The applicable rules depend on the mortgage program, property type, loan-to-value ratio, borrower’s age, accessibility of the funds and whether distributions have already begun.

Using Accumulated Assets as Qualifying Income

Certain conventional mortgage programs allow a lender to convert eligible accumulated assets into monthly qualifying income. This is sometimes called asset depletion, asset dissipation or assets as income.

Despite those names, the borrower may not actually be required to liquidate the account or begin withdrawing that calculated amount every month. The calculation is primarily an underwriting method used to determine whether the borrower has sufficient financial resources to support the proposed mortgage payment.

Freddie Mac recently expanded its accumulated-assets guidelines. Among other changes, the updated rules:

• Produce approximately 33% more qualifying income from the same eligible asset balance.
• Remove the previous age restriction when eligible non-retirement assets are used.
• Permit qualifying investment-property transactions.
• Permit loan-to-value ratios above the previous 80% limit, potentially up to the maximum otherwise allowed for the transaction.

The updated Freddie Mac provisions are mandatory for mortgages with settlement dates on or after February 3, 2027. However, lenders are permitted to implement them earlier. Borrowers should therefore confirm whether their lender is currently applying the updated requirements.

The complete Freddie Mac requirements can be found in Freddie Mac Guide Section 5307.1.

How Is Income From Accumulated Assets Calculated?

Under Freddie Mac’s updated calculation, eligible net assets are generally divided by 180 months to determine the monthly qualifying income.

For example:

• Eligible net assets: $800,000
• Divided by: 180 months
• Monthly qualifying income: approximately $4,444

Under the former 240-month calculation, the same $800,000 would have produced approximately $3,333 in monthly qualifying income. The new calculation therefore produces approximately 33% more income from the same eligible asset balance.

This is a simplified example. An actual lender calculation may be lower because the entire account balance may not necessarily available for qualifying purposes.

The lender may first need to subtract:

• Funds used for the down payment
• Closing costs
• Required financial reserves
• Applicable withdrawal penalties
• Required discounts for certain asset types
• Other amounts required under the applicable mortgage guidelines

For example, if a borrower has $800,000 in eligible assets but needs $150,000 for the down payment, closing costs and reserves, the lender may calculate qualifying income using the remaining $650,000 eligible balance rather than the full $800,000.

What Types of Assets May Be Eligible?

Depending on the mortgage program, eligible assets may include:

• Individual retirement accounts
• 401(k), 403(b), SEP and Keogh accounts
• Stocks, bonds and mutual funds
• Depository accounts
• Certain lump-sum retirement distributions
• Other eligible accumulated assets permitted by the applicable guidelines

Eligibility varies. The lender must verify account ownership, the borrower’s access to the funds, the composition and value of the assets, and whether taxes, penalties or other reductions must be considered.

Assets jointly owned with someone who is not a borrower may also require additional review or may not be fully eligible.

What If I Already Receive Retirement Distributions?

If you already receive recurring retirement distributions, the lender may be able to use the actual distribution amount as qualifying income instead of converting the entire account balance into an income stream.

Under current Fannie Mae guidelines:

• A fixed retirement distribution or fixed payment has no minimum receipt-history requirement.
• A variable distribution generally requires a minimum 12-month history.
• Variable retirement income is generally averaged over the most recent 12 months.
• Distributions from a retirement account generally must be expected to continue for at least three years from the mortgage note date.
• Eligible balances from 401(k), IRA and Keogh accounts may be combined to determine whether the income can continue for the required period.
• The borrower must have the required access to the accounts.

A lender may document the income using account statements, benefit statements, award letters, bank statements, tax returns, Forms 1099 or other acceptable evidence showing the amount, frequency and expected continuance of the payments.

Current requirements are available in Fannie Mae’s Annuity, Pension or Retirement Income guidelines.

Can I Use Retirement Assets Without Taking Withdrawals?

Possibly. Certain conventional mortgage guidelines allow eligible retirement or other accumulated assets to be converted into calculated monthly qualifying income even when the borrower is not presently receiving regular distributions.

Using an account for an underwriting calculation does not necessarily require the borrower to liquidate the account or begin taking monthly withdrawals. However, the lender must verify that the assets satisfy the applicable ownership, accessibility and eligibility requirements.

Do I Have to Be 62 Years Old?

Not under every asset-based income program.

Age requirements vary depending on the mortgage agency, loan-to-value ratio, asset type and underwriting method. For example, Fannie Mae’s employment-related-assets guidelines currently permit a maximum loan-to-value ratio of 70% without the borrower being 62. The maximum may increase to 80% when the owner of the assets being used to qualify is at least 62 and the other applicable requirements are satisfied.

Freddie Mac’s updated rules remove the previous age-based restriction when eligible non-retirement assets are used. Retirement accounts may still be affected by accessibility requirements and possible early-withdrawal penalties.

Because the answer depends on the specific program, borrowers should not assume they are either eligible or ineligible based solely on age.

Fannie Mae’s employment-related-assets guidelines provide additional details.

Do I Have to Liquidate My Retirement Account?

Not necessarily. Using an account balance to calculate qualifying income does not always require the borrower to sell the investments, liquidate the account or withdraw the calculated monthly amount.

The lender must nevertheless verify that the assets are available and accessible under the applicable mortgage guidelines. Withdrawal restrictions, penalties, account vesting and asset composition may affect the eligible amount.

Can I Use the Same Assets for My Down Payment and Qualifying Income?

The same dollars generally cannot be counted twice.

Funds needed for the down payment, closing costs and required reserves are ordinarily subtracted before the remaining eligible balance is converted into monthly income.

For example, if a borrower has $1 million in eligible assets but must use $200,000 for the down payment, closing costs and reserves, the income calculation may be based on the remaining eligible $800,000 balance rather than the full $1 million.

Can Retirement Income Be Used to Buy an Investment Property?

Potentially.

Recurring retirement distributions may be treated as regular qualifying income when they satisfy the applicable documentation, history and continuance requirements.

Freddie Mac’s expanded accumulated-assets provisions also permit investment-property transactions. However, lenders are not required to implement the updated Freddie Mac provisions before their mandatory effective date. Eligibility must therefore be confirmed with the individual lender.

What Documents Will the Lender Require?

Documentation will depend on whether the lender is using actual retirement distributions or converting accumulated assets into qualifying income.

The lender may request:

• Recent retirement or investment-account statements
• Evidence of account ownership
• Documentation establishing access to the funds
• Distribution statements
• Pension or benefit award letters
• Recent bank statements
• Forms 1099
• Tax returns
• Documentation of the amount and frequency of distributions
• Evidence that the income can continue for the required period

The lender may also need to document the assets used for the down payment, closing costs and reserves before determining the remaining balance available for the income calculation.

Are Taxes or Early-Withdrawal Penalties Deducted?

They may affect the eligible asset balance.

Depending on the applicable mortgage guidelines, the lender may be required to subtract early-withdrawal penalties, liquidation costs or other required reductions. The treatment can vary based on the type of account, the borrower’s age and the borrower’s access to the funds.

Income taxes and early-withdrawal penalties are separate issues. Borrowers should consult a qualified tax professional before withdrawing or liquidating retirement assets.

Will Using Retirement Assets to Qualify Create a Taxable Withdrawal?

Merely using an account balance in a mortgage-underwriting calculation generally does not itself create a withdrawal or taxable event.

However, actually selling investments, withdrawing money or liquidating a retirement account may produce income-tax consequences or early-withdrawal penalties. Mortgage eligibility and tax treatment are separate matters, so borrowers should obtain tax advice before moving retirement funds.

Is Asset-Based Income the Same as an Asset-Depletion Mortgage?

The terms are sometimes used interchangeably, but they can describe different programs.

Fannie Mae and Freddie Mac provide conventional underwriting methods that convert eligible assets into qualifying income. Banks, portfolio lenders and non-qualified-mortgage lenders may offer their own asset-depletion programs with different calculations, eligible assets, down-payment requirements and documentation standards.

A borrower who does not qualify under one method may still qualify under another.

What Is the Best Way to Determine Whether I Qualify?

The most reliable approach is to complete a full mortgage preapproval and provide the lender with current statements for all potentially eligible retirement, investment and depository accounts.

The lender can then determine:

• Which accounts are eligible
• Whether actual distributions or accumulated assets should be used
• How much of the balance remains after closing costs and reserves
• Whether penalties or other reductions apply
• Which mortgage program produces the greatest qualifying income
• Whether the income satisfies all underwriting requirements

Small differences between Fannie Mae, Freddie Mac and portfolio-lender guidelines can materially change the result.

Conclusion

Retirement and investment assets may help borrowers qualify for a mortgage in ways that are frequently overlooked. You may be able to use actual recurring distributions, or a lender may be able to convert eligible accumulated assets into calculated monthly income—even when you are not currently taking withdrawals.

The rules are detailed, and the best calculation is not always obvious. An experienced mortgage professional should compare the available programs before deciding that a borrower’s documented income is insufficient.

To discuss using retirement accounts or other assets to qualify for a mortgage, click here to schedule a call or email me at brian@getloans.com.

Tags: mortgage guidelines, mortgage qualifying, retirement income

This entry was posted on Saturday, September 10th, 2022 at 12:32 pm and is filed under Home Buying Process, Loan Process, mortgage, Underwriting Rules. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.