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How Much Can You Gross Up on SSI, VA PENSION, AND RETIREMENT PENSION
How Much Can You Gross Up on SSI, VA PENSION, RETIREMENT PENSION INCOME on FHA, VA, USDA, and Conventional Loans.
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FHA allows grossing up non-taxable income from SSI and Veterans Affairs (VA) pensions by 15%, while VA, USDA, and conventional loans allow a 25% gross-up, subject to additional agency and investor requirements.
The following offers a close-up, guideline-level assessment you may incorporate into your material.
Core Gross-Up Percentages
- FHA: 15% gross-up, or the effective tax rate if documented from the most recent tax return.
- Conventional (Fannie/Freddie): 25% gross-up, with some lenders allowing higher if the effective tax rate is higher.
- VA: As per the VA handbook and most lenders, gross-up is 25% (or 125% of non-taxable income), but grossed-up income cannot be used for residual income tests.
- USDA: 25% gross-up of non-taxable income, per USDA Handbook Chapter 9.
Example: For DTI qualification, $1,000/month of non-taxable Social Security or VA pension income can be considered $1,150 for FHA and $1,250 for VA, USDA, and Conventional.
SSI and Social Security income
SSI, Social Security retirement, and SSDI that are non-taxable may be grossed up if they meet continuity rules:
- FHA: Non-taxable Social Security (retirement, SSDI, SSI) is grossed up 15% if likely to continue for three years or more.
- Conventional: Non-taxable SSI/SS/SSDI is grossed up 25% with a three-year continuance and award letter, 1099, and bank statements.
- VA: Non-taxable Social Security can be grossed up 25%, but the gross-up applies only to DTI, not residual income.
- USDA: Non-taxable
VA Disability and VA Pension Income
VA loans (and other products), VA disability, and VA pension income are non-taxable.
- VA loans: For VA loans, lenders can gross up non-taxable VA disability and VA pension income by 25% (i.e., a 125% factor) for DTI purposes; the VA refers to the current withholding tables; however, most lenders use a standardized gross-up of 25%.
- FHA, USDA, and Conventional: If VA disability and/or VA pension income are non-taxable, the same framework applies; therefore, gross up of 15% for FHA, and 25% for USDA and Conventional loans.
However, VA expressly forbids the use of gross up in the calculation of residual income; in that case, you will use the actual net benefit amount.
Retirement and Other Pension Income
Retirement and pension income may be fully taxable or partially/non-taxable depending on source (e.g., some federal, railroad, and state pensions can be tax-exempt in whole or part):
- FHA: Non-taxable retirement/pension income (based on IRS treatment and borrower’s return) can be grossed up 15%, or by the documented effective tax rate.
- Conventional: Non-taxable income of pension/retirement can be grossed up by 25%; some lenders may choose to permit a higher gross up based on documented effective tax rate.
- VA: Non-taxable retirement income is 25% grossed-up for DTI, but is subject
Underwriters typically require the following for the SSI, VA pension, and retirement income gross‑up:
- Evidence that income is non‑taxable:
- Recent federal tax returns (evidence showing minimal to no tax liabilities on the income).
- Award letters and benefit statements, and/or 1099s showing income is non‑taxable.
- Evidence that income is expected to continue for At Least 3 Years (benefit award letters, statements from retirement plans).
- Evidence of the three C’s (especially for pension income):
- At least a two-year history or recent retirement, along with sufficient documentation that benefits have commenced and will continue (i.e., retirement benefit order).
From a content/SEO perspective, you can build your guide around “non‑taxable income gross‑up rules” and have various sections per program (FHA, VA, USDA, conventional) and illustrate the simple gross‑up rule of thumb, which is:
- 15% gross‑up for FHA.
- 25% gross‑up for VA, USDA, and conventional for qualifying income, which is also subject to the residual‑income and continuance rules.
gustancho.com
Social Security Income For Mortgage Lending Guidelines
Social Security Income For Mortgage can be used and can be grossed up to 15% on FHA loans, and 25% on conventional, VA, and USDA loans
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