Can you buy a house on disability? In Fannie Mae’s Selling Guide, the answer starts with paperwork. For loans delivered to Fannie Mae, long-term disability income, Social Security income and VA benefits income each have a topic of their own. All three topics carry the same sentence, word for word: “The monthly income amount as documented above may be used as qualifying income.”
That matters before you apply. A plan built on a monthly benefit works better when you know how the guide asks a lender to document that benefit, because the three pages don’t ask for the same things.
So start by matching the benefit to the right topic. Gather the papers that topic names. Then ask a loan officer which guide and which documents apply to your loan.
What Does the Guide Ask For With Long-Term Disability Income?
In the guide’s long-term disability income topic, a lender collects the borrower’s disability policy or benefits statement from whoever pays the benefit. Those papers show eligibility for the benefit, the amount, how often it is paid, and whether a contract sets an end or change date.
The topic’s Documentation row puts it plainly. It says “The lender must obtain a copy of the borrower’s disability policy or benefits statement from the benefits payer (insurance company, employer, or other qualified disinterested party)”, and it says those papers are used to determine “the borrower’s current eligibility for the disability benefits, the amount and frequency of the disability payments, and if there is a contractually established termination or modification date”.
A separate requirement sits in the same topic. “Additionally, the lender must obtain evidence that the borrower will receive at least one payment on or before the first payment due date.”
The same topic is brief on two more points. On history it says “No minimum history is required.” On how long the income is expected to last, it says “Lenders are not required to verify continuance unless they have reason to believe the income may not continue.” A parenthetical in that same row adds “Re-evaluation of benefits is not considered a reason to support income will not continue.” All three of those sentences sit on the long-term disability topic.
The topic also marks its own edge: “It does not apply to disability income that is received from the Social Security Administration.” Social Security disability has a topic of its own. That one is next.
How Does the Guide Handle Social Security Disability Benefits?
The guide’s Social Security income topic sorts benefit types into a table, and a disability benefit gets its own row. For a benefit drawn on the borrower’s own account or work record, that row lists the papers a lender can use to show regular receipt.
The row for a disability benefit on the borrower’s own record lists these ways to show regular receipt:
- “Social Security Administration’s (SSA) Award letter”
- “SSA-1099”
- “Most recent signed federal income tax returns” or tax transcripts
- “Proof of current receipt”
The same page adds a sentence about award letters. It says “an SSA Award letter may be used to document the income if the borrower is receiving Social Security payments or if the borrower will begin receiving payments on or before the first payment date of the subject mortgage as confirmed by a recently issued award letter”.
A footnote to the table’s tax-return item qualifies that option: “If joint tax returns or tax transcripts include income that is not associated with a borrower on the loan transaction, the lender must obtain additional documentation supporting the amount of income from the SSA being used in qualifying, such as the SSA-1099.” That footnote hangs on the tax-return item, not on the rest of the list.
On how long the income is expected to last, the page sets out two cases. For “Retirement/Long-Term Disability based on own account/work record” it says “Lenders are not required to verify continuance unless they have reason to believe the income may not continue.” For “Other scenarios” it says “The lender must document that income is expected to continue for at least three years from the note date.” The page doesn’t map those two cases to the table’s columns. A loan officer can confirm which case applies.
The page also carries a note on how the monthly amount is figured: “The lender is not required to provide documentation to support that 15% of the Social Security income is nontaxable.” That note is about how a lender may figure the amount, not a figure for you to use.
Social Security paid as a retirement benefit is a different row on the same page. You can read how lenders verify income for retirees on fixed incomes in an earlier Fellowship post.
Do VA Benefits Count the Same Way?
The paperwork is different. The guide’s VA benefits income topic is separate from the other two, with its own list of papers and its own wording on how long the income is expected to last. It also carves out education benefits. Those differences are worth reading before you gather anything.
The topic says “The lender must obtain verification of the income amount and terms using one or more of the following”: “a statement from the organization (VA) providing the income”, “a copy of the award letter or benefit statement”, “a copy of the financial or bank account statement”, “a copy of the signed federal income tax return” or “an IRS 1099 form”.
On how long the income is expected to last, the topic says “The lender must document that income is expected to continue for at least three years from the note date.” A parenthetical in the same row says “Verification is not required for VA retirement or long-term disability benefits.” The page doesn’t say which VA benefits fall under that last label. Ask your lender how it classifies yours.
The topic draws one more line in a note: “Education benefits are not acceptable income because they are offset by education expenses.”
One boundary on all of this. These are Fannie Mae’s rules for income from VA benefits on a loan delivered to Fannie Mae. This article covers only Fannie Mae’s guide, and it doesn’t describe what a loan backed by VA or FHA asks for.
What if You’re Still Receiving Short-Term Disability?
The long-term disability topic has a rule for one case: a borrower who receives short-term disability payments that will change. Short-term disability on its own goes to a different topic of the guide, the one on temporary leave income. That topic isn’t covered here.
The topic adds that “if a borrower is currently receiving short-term disability payments that will decrease to a lesser amount within the next three years because they are being converted to long-term benefits, the amount of the long-term benefits must be used as income to qualify the borrower”.
That sentence covers payments that will decrease within the next three years because they’re being converted to long-term benefits. The page doesn’t address other short-term situations, so a loan officer can tell you how the guide applies to your payments.
Where Does Your Benefit Fit in the Rest of the Application?
All three pages answer a narrow question: how a benefit is documented, and what monthly amount a lender may use. They don’t say whether a loan is approved. They don’t say what it costs or how long it takes. And they don’t say what any other loan program or lender requires.
Fellowship’s mortgage process page describes what its team looks at: “We holistically assess income, debt-to-income ratio, credit score, employment trajectory, and property type to determine eligibility.” That list is longer than income alone.
Fellowship’s home purchase page puts it this way: “Depending on your circumstances, one home loan may be better than another.” That is why the guide’s pages are a starting point for a conversation with a loan officer, not an answer for your file.
Income is one part of the file, and monthly bills are another. You can read which bills count in your debt-to-income ratio in another Fellowship post.
Frequently Asked Questions About Buying a House on Disability
Can you buy a house on disability?
In Fannie Mae’s guide, the documented monthly amount of each of the three benefits “may be used as qualifying income”. Whether a loan is approved depends on the whole file, and these three pages don’t address that. A loan officer can talk through your file with you.
Does disability income have to be around for a set number of years?
Fannie Mae’s guide treats income history and income continuance as separate rows. On history, each of the three pages says “No minimum history is required.” On how long the income is expected to last, the rows differ from one another, so read the topic that matches your benefit.
What if your benefits are reviewed?
The long-term disability topic says “Re-evaluation of benefits is not considered a reason to support income will not continue.” That sentence sits on that topic only. The Social Security and VA topics don’t repeat it. A loan officer can say how a review would be treated on your loan.
Does Supplemental Security Income count?
The Social Security topic lists “Supplemental Social Security Income” as its own row. For a borrower drawing on their own account, that row shows “SSA Award letter, and Proof of current receipt”. Whether it fits your loan is a question for the lender.
Do the same rules apply to an FHA or VA loan?
This article covers only Fannie Mae’s guide. Fellowship’s mortgage process page says “Each loan program has different sets of eligibility guidelines.” So ask the loan officer which guide applies to the loan you’re considering.
Will a lender ask for papers that are not on these lists?
The guide leaves room for that. Each of the three pages notes that when the guide’s validation service checks the income, the documentation it calls for “may differ from the requirements described above”. So the lender is the one who can tell you which papers it needs for your loan.
Papers to Gather Before You Call a Loan Officer
The right papers depend on which benefit you receive and on the loan itself. Bring what the guide’s pages name, then let the loan officer tell you what applies to your file. Three starting points, one for each topic:
- A long-term disability policy: the policy or benefits statement from the payer, which shows the amount, how often it is paid and any end or change date.
- Social Security: the SSA award letter or the SSA-1099, since the page lists both.
- VA benefits: a statement from VA, or the award letter or benefit statement, since the page names those.
When you’re ready, you can talk with a Fellowship loan officer about your income and which papers apply.
This is general education about Fannie Mae’s published rules, not individual lending, legal, tax or benefits advice, and not a commitment to lend.
