Can You Get a Mortgage on Disability?
Navigate the path to homeownership with disability income. Understand how lenders evaluate your income and the steps for mortgage approval.
It is possible to secure a mortgage even if your income primarily comes from disability benefits. Lenders consider disability income a valid and stable source for mortgage qualification, similar to traditional employment income. Lenders’ primary concern is assessing the stability and likely continuation of all income sources to ensure you can consistently afford monthly mortgage payments.
Understanding Disability Income for Mortgage Qualification
Mortgage lenders assess various types of disability income to determine their stability and duration for qualification purposes. Common forms include Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), long-term disability insurance (private or employer-provided), and Veterans Affairs (VA) disability benefits. The crucial factor is the likelihood of income continuation for at least three years from the mortgage origination date.
For non-taxable disability income, such as SSI and VA benefits, lenders often apply a process called “grossing up.” This means they can increase the income by 15% to 25% to account for no taxes being deducted. For example, $2,000 of non-taxable income might be treated as $2,500 for qualification purposes. This adjustment helps level the playing field when comparing non-taxable income to gross taxable income for debt-to-income calculations.
Lenders prioritize the consistency and duration of disability benefits. If your award letter or equivalent documentation does not specify an expiration date, lenders generally consider the income likely to continue indefinitely. However, if a defined expiration date falls within three years of the mortgage application, that income may not be fully considered for qualification.
General Mortgage Eligibility Requirements
Beyond income, mortgage lenders evaluate several other financial factors for eligibility. Your credit score and history reflect your ability to manage financial obligations. Lenders review payment history, credit utilization, and the length of your credit relationships. While minimums vary by loan type, a credit score of at least 620 is often a baseline for conventional loans, and FHA loans may allow scores as low as 580 with a lower down payment.
The debt-to-income (DTI) ratio compares your total monthly debt payments to your gross monthly income. Lenders calculate both a front-end ratio (housing expenses) and a back-end ratio (all monthly debts). While many lenders prefer a back-end DTI ratio of 36% or lower, some loans, like FHA, may allow up to 50% or higher in certain situations, especially with compensating factors like strong reserves.
Asset requirements cover funds for the down payment, closing costs, and financial reserves. Down payments can range from 3% to 20% or more, depending on the loan program. Closing costs, including fees for appraisal, title, and loan origination, typically range from 3% to 5% of the loan amount. Lenders may also require reserves, which are liquid assets held after closing, often equivalent to several months of mortgage payments, to demonstrate financial stability.
The Mortgage Application Process with Disability Income
The mortgage application process generally begins with pre-qualification or pre-approval to determine your potential borrowing power. This initial step reviews your financial situation, including income and credit. Once pre-approved, you can find a home and submit a formal mortgage application.
When applying with disability income, specific documentation is necessary to verify benefits. You will typically need official award letters from the Social Security Administration (SSA) or the Department of Veterans Affairs (VA), stating the amount and start date of your benefits. Lenders may also request recent bank statements showing consistent deposits. If the award letter does not clearly state the income’s continuation, lenders might seek additional verification. Lenders are prohibited from inquiring about the nature of your disability or requesting medical records.
During underwriting, the lender reviews all submitted documentation to verify income, assets, and credit history. Underwriters confirm disability benefits are likely to continue for at least three years, as indicated by the award letter or other official documents. Being transparent with your lender about income sources and having all required documentation available can help streamline this process.