Can You Buy a House on Disability? Yes, If You Qualify

Sep 19, 2023

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If you're using a mortgage to purchase a home, you'll need to to meet your lender's requirements to qualify. Typically, this comes down to just a few things: credit, income, debts, and down payment.

When looking at the money you'll be using to make your mortgage payments each month, lenders will consider income that comes from a variety of different sources, including child support payments, public assistance income, and yes, disability benefits.

As long as homeownership doesn't push your debt-to-income ratio too high, it's possible to buy a home when all or the majority of your income comes from disability benefits or insurance.

In the eyes of a mortgage lender, disability income is basically viewed like any other income, with one exception that can work in your favor (more on that in a minute).

The lender wants to make sure that you can do two things: afford your monthly payments now and continue affording your monthly payments for the foreseeable future.

If your income is sufficient and you'll continue receiving it for at least three years, you should be able to use it to qualify for a mortgage and purchase a home — as long as you meet the lender's other requirements, as well.

Disability income can come from a few different sources, including:

When using disability income to qualify for a mortgage, you'll go through the same process as any other borrower. The lender will look at your credit, debts, assets, and all sources of income you provide.

To show proof of disability income, you'll need to provide some verification that you're currently receiving benefits and that they aren't set to expire within the next three years. The documentation you provide will also need to specify how much you receive, and how often your benefits are paid.

Acceptable documentation of disability income can include:

In addition to providing information about your disability income (and any other sources of income you have), you'll need to meet your lender's down payment and credit requirements. This means you'll likely need:

If the income you receive isn't taxed, your lender may "gross it up," meaning it inflates your income by a certain percentage to account for the the fact that you get to keep the full amount.

"As long as this income is deemed non-taxable, you can gross up the monthly income by 125%," says Brian Quigley, founder of Beacon Lending.

For example, if you receive $2,000 of non-taxable SSDI income each month, the lender is able to look at that income as equal to $2,500 per month, since you don't pay taxes on it.

"This is very important, especially if your debt-to-income ratio is teetering on the side of loan not being approved," Quigley says. "That extra 25% is essential!"

If you're only receiving short-term disability benefits, you'll likely have a harder time using that income to qualify for a mortgage.

"If the disability benefit does not continue for at least three years or more, this will be a challenge with most lenders in granting that income as qualifying when purchasing a home," Quigley says.

If you're currently receiving disability benefits that will be reduced at some point in the future, that can also make qualifying for a mortgage challenging, since the lender will likely only consider the reduced amount.

SSI recipients may also have a tricky time saving enough for a down payment, since this benefit is limited by financial need. If you save too much, you could become ineligible for this benefit. Currently, individuals can't have more than $2,000 in assets if they receive SSI. Couples can't have more than $3,000.

If you aren't able to save much for a down payment, check out your low or no down payment mortgage options. Many state and local governments, nonprofits, and lenders also offer down payment assistance in the form of grants or forgivable loans.

If you have a lower income, there are programs available to help make homeownership more affordable. Look for programs in your state or loans and grants specifically geared toward individuals with disabilities. Many lenders also offer affordable mortgages for first-time or low-income borrowers.

Lenders can't refuse to consider disability benefits income, and they can't treat you differently because of your disability or your disability income.

This means they can't hold you to stricter documentation requirements than they do other applicants. For example, a lender isn't allowed to ask you about the nature of your disability or request documentation from your doctor asserting that your disability is likely to continue.

As long as your disability award letter doesn't have an expiration date showing that your benefits will end within the next three years, the lender must treat the benefits as likely to continue.

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