If you are receiving Social Security disability benefits and you thought that you’d never be able to get a reverse mortgage, you should know that disability benefits don’t disqualify you from getting one. In fact, your disability benefits can be counted as income to help you qualify.
Qualifying for A Reverse Mortgage
To qualify for a reverse mortgage, you must submit financial information to a lender, so that they can get an accurate idea of what your financial situation is like. The amount of information you need to submit may vary from lender to lender. This stage is also referred to as the Financial Assessment. Lenders conduct “financial assessments” of every prospective reverse mortgage client to ensure you have the financial means to continue paying property taxes, homeowners insurance, homeowners association dues, and other property charges. Lenders analyze all income sources, including your Social Security disability benefits, as well as your credit history.
If a lender determines that you have sufficient income left over each month, then you won’t have to worry about having any funds set-aside to pay for future tax and insurance payments. If, however, a lender determines that you may not be able to keep up with property taxes and hazard insurance payments, they will be authorized to set-aside a certain amount of funds from your loan to pay future charges.
While you’re qualifying, the lender may want to see documentation of:
Additional Income
If you’re receiving any money monthly in addition to your disability benefits the lender may want to see that. It can help your case financially to show that you have additional income. If you’re getting alimony payments from a divorce you may include that in your prequalification application, although you don’t legally have to. You may also include any money that you make from things that you sell online or any other part-time home business that you have.
- Your Investments
Returns from investments, money from your 401K, or payments from annuities that you get regularly also will be considered by the reverse mortgage lender.
- Your Social Security Benefits
If your Social Security disability benefits are the main income that you have you will need to make sure that you submit plenty of documentation to show that you are receiving regular disability payments. In most cases, this is the amount of money that the lenders are looking at as your source to pay back the mortgage.
Verifying Your SSD Income
Because your disability benefits are the primary income that you have, the lender will want to see your benefit statement from the SSA that tells your benefit award amount and how long you are projected to be receiving benefits. You can print a copy of your benefit award statement from your account through the SSA’s website or visit your local SSA office and have one mailed to you.
Documentation
Every bit of money that you get may need to be documented by the lender. This can seem very tedious but it’s worth the hassle. Be prepared to submit bank statements, investment portfolio statements, check stubs, and all other financial documentation that you have or can get.
Things to Consider
A reverse mortgage does not affect regular Social Security payments or disability benefits. However, if you are on Supplemental Security Income (SSI), any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain count as an asset and could impact eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset.
A Dream Come True
The reverse mortgage process usually isn’t fast or easy for anyone, and it can take a bit of time to get prequalified. But in the long run it’s definitely worth a little hassle to ensure you live a financially secure retirement.
Resources:
Reverse Mortgage: https://www.reversemortgage.org/
Disability Benefits: https://www.disabilitybenefitscenter.org/disability_benefits.shtml
Local SSA Office: https://www.disabilitybenefitscenter.org/state-social-security-disability Disclaimer: The following article was written by Disability Benefits Center and adapted by the National Reverse Mortgage Lenders Association for a reverse mortgage audience.