Key takeaways
- Retirees can qualify for a mortgage using Social Security, pensions and other stable income sources, with lenders focusing on debt-to-income ratios rather than a borrower’s age.
- Savings vehicles such as 401(k)s and IRAs can be used to fund a home purchase, but withdrawals can trigger taxes and reduce long-term retirement security, making loans a potentially safer alternative for some buyers.
- Reverse mortgages allow homeowners 62 and older to tap home equity without monthly payments, but they come with ongoing obligations and risks that make them best suited for equity-rich, cash-poor retirees.
Retirement conjures up images of rest and relaxation. But buying a home? There's no reason it can't be a reality, real estate professionals told Homes.com.
“It’s not about your age, it’s about dollars and cents,” said Andrew Undem, an agent who owns Sure Group Real Estate of Berkshire Hathaway in Baltimore, Maryland.
Almost half of homebuyers in 2024 were 60 or older, according to the 2025 Home Buyers and Sellers Generational Trends report published by the National Association of Realtors.
Retirement income counts as any other asset
Homebuyers on a fixed income qualify for a mortgage using the same debt-to-income ratio as other applicants, said Undem. Steven Espinoza, a loan officer at 01NE MORTGAGE in West Covina, California, added, “We take any form of income as long as it is deemed stable.”
Lenders particularly see Social Security as a stable flow of income because the amount never decreases — it only rises with annual cost-of-living increases, Espinoza said. “A Social Security award letter is gold," he said.
Retirees can use their 401(k), IRA savings
401(k) accounts can be liquidated without a 10% early-withdrawal penalty after age 59 1/2. The downside is that the proceeds are taxable as income, possibly pushing you into a higher tax bracket.
An exception: the Roth IRA, which is not taxed when withdrawn because it was taxed at the time you invested it.
Taking money out of your IRA also leaves you with less money to get you through retirement. You'll also lose any investment gains that you would have accrued.
A safer bet may be to take a loan from your IRA, according to Experian. The money won't be taxable, and the loan will not count toward your debt-to-income ratio. A loan also is not contingent on your credit score and does not affect it.
Still, the downside is that you generally must repay the loan within five years, Experian said. And as with a withdrawal, you'll miss out on any investment gains while you're paying it back.
Reverse mortgages an option for retirees
In a reverse mortgage, a homeowner borrows a portion of the home's equity, according AARP.
The loan isn't repaid until the homeowner dies or permanently moves from the property, including a nursing home or assisted living facility.
Generally, the homeowner needs to be at least 62 years of age.
Homeowners remain responsible for property taxes, homeowners' insurance, homeowner association fees and assessments. They also must keep the property maintained.
Homeowners can receive monthly payments for a set time, in a lump-sum or a line of credit, for as long as they are living in the home.
Although no payments are made on a reverse mortgage, interest and fees still accrue. This increases the loan balance over time, because no payments are made on the debt.
Reverse mortgages aren't for everyone, the AARP cautioned. Homeowners must still pay the taxes and other fees on the house. If a homeowner fails to pay, the bank can foreclose on the property, it said. A home equity loan takes the funds heirs would have gotten from an estate, it said.
The federal government insures reverse mortgages through the Home Equity Conversion Mortgage program, said Espinoza. If the house is under water, meaning it is now worth less than the outstanding mortgage amount, mortgage insurance covers the deficit and the estate pays nothing. “It is a great retirement tool for people that are equity-rich but cash poor,” he said.
Checklist
- Do you have a copy of your Social Security award letter to submit with your loan application? An award letter verifies your monthly benefits and is considered with your other forms of income.
- Do you have any funds in a 401(k) that you can use as a down payment? Assets in a 401(k) can be liquidated without penalty after age 59 ½. They will be taxed as income, however.
- Is a reverse mortgage an option? A reverse mortgage gives retirees liquidity and a stream of income from a lender, who purchases the home but allows the occupants to continue living in them.