What Income Counts Toward Qualifying for a Mortgage?
Social Security, pension, retirement, and disability income all count toward mortgage qualifying, and so does self-employed or 1099 income, though it is measured differently. Non-taxable income like Social Security can often be increased through a process called "grossing up," while self-employed income is typically documented using net income from filed tax returns rather than gross pay or deposits. Whether any of this adds up to enough for the loan amount you want depends on your specific numbers.
Last updated July 22, 2026Does Social Security, disability, or pension income count?
Yes. Social Security, pension, retirement income, and disability income (including VA disability) can all be counted as qualifying income for a mortgage. Lenders generally want to see that the income is stable and expected to continue. Retirement or investment account balances can sometimes also help you qualify even if you are not actively withdrawing from them, through an asset-depletion calculation or by setting up a documented monthly distribution.
What is "grossing up" and how does it work?
Some income, like Social Security or VA disability, is nontaxable at the source, meaning you receive it without income tax withheld. Because that income stretches further than an equivalent taxable paycheck, lenders can "gross up" the nontaxable portion, effectively counting a higher amount for qualifying purposes. The standard gross-up factor is 25% for conventional, VA, and USDA loans, and 15% for FHA loans. Pension or other income that is fully taxable at the source generally cannot be grossed up.
How does self-employed or 1099 income get counted?
Self-employed, 1099, and business income is typically documented using roughly the last two years of filed tax returns, such as Schedule C, 1099 forms, or K-1s. What counts is net income after business write-offs and deductions, not gross revenue and not gross bank deposits. A business that has been open five years or more can sometimes qualify with just one year of tax returns instead of two. For borrowers whose tax returns understate their real cash flow, bank-statement (non-QM) loan programs offer an alternative, qualifying off 12 to 24 months of business bank deposits instead of tax returns. Bank-statement programs commonly carry a somewhat higher interest rate than standard documented-income loans, since the lender is taking on more risk by qualifying off deposits instead of tax returns.
What if my income does not add up to the loan amount I want?
It depends on your situation:
- Your qualifying income (including any gross-up) is enough for the loan amount you want. You can typically move forward on that basis alone.
- Your income falls short even after gross-up or self-employment averaging. Adding a co-borrower or co-signer, or requesting a smaller loan amount, are both commonly used paths forward.
- Your tax returns understate your actual cash flow as a self-employed borrower. A bank-statement (non-QM) program may let you qualify using deposit history instead, generally at a somewhat higher rate.
| Social Security, VA disability (nontaxable) | Grossed up 25% (conventional, VA, USDA) or 15% (FHA) |
|---|---|
| Fully taxable pension or other income | Not grossed up |
| Self-employed / 1099, standard path | About 2 years of tax returns |
| Self-employed, business open 5+ years | May use 1 year of tax returns |
| Bank-statement (non-QM) program | 12-24 months of business deposits |
Related questions
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Sources
- https://selling-guide.fanniemae.com/sel/b3-3.4-15/social-security-income
- https://selling-guide.fanniemae.com/sel/b3-3.4-03/annuity-pension-or-retirement-income
- https://selling-guide.fanniemae.com/sel/b3-3.1-01/general-income-information
- https://singlefamily.fanniemae.com/media/37666/display
- https://selling-guide.fanniemae.com/sel/b3-3.4-06/employment-related-assets-qualifying-income
- https://trussfinancialgroup.com/blog/fannie-mae-self-employed-guidelines
- https://corr.pennymac.com/non-delegated-announcements/non-delegated-announcement-23-78
- https://homebuyer.com/guidelines/fannie-mae/underwriting-factors-and-documentation-for-a-self-employed-borrower-b3-3-2-01
- https://mbanc.com/blog/bank-statement-mortgage-a-non-qm-loan-for-self-employed
- https://griffinfunding.com/non-qm-mortgages/bank-statement-loans
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.