The Quick Read: Yes. A mortgage broker can arrange an FHA cash-out refinance for a retiree whose income is a pension. The broker gathers the file and submits it to a wholesale lender. That lender is FHA-approved, and it does the underwriting and approval. Pension income counts when it is documented and likely to continue. The home must also meet the occupancy, payment-history and equity tests. Approval depends on the lender, the property and the full file.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
What a Broker Does and Does Not Do
A broker is the go-between. Lendmire is a mortgage broker. It takes your application, collects your documents and matches the file to a wholesale lender whose guidelines fit. It does not lend, underwrite or approve. The approved lender makes those calls.
Why does that matter to a retiree? Because the FHA rules are the same either way. A broker cannot bend a pension rule or waive an equity test. What a broker can do is read the file early, spot weak points, and choose a lender whose program fits your situation. For a borrower with a mix of income types, that early read can save a lot of back-and-forth.
The path for the FHA cash-out refinance program is spelled out on Lendmire’s FHA cash-out refinance program page. The sections below show how it works for someone living on a pension.
Who Does What
| Stage | Broker | Wholesale lender | Borrower |
|---|---|---|---|
| Intake | Reviews goals and income | Not involved yet | Shares basics and documents |
| Application | Takes it and discloses | Receives the file | Signs and confirms details |
| Processing | Gathers and checks documents | Sets conditions | Answers requests |
| Underwriting | Tracks conditions | Reviews and decides | Provides updates |
| Appraisal | Coordinates the order | Reviews the value | Allows access |
| Closing | Reviews the figures with you | Funds the loan | Signs final papers |
Loan Estimate and Closing Disclosure rules apply because this is a consumer mortgage. Those documents show your actual costs. Read them side by side before you sign.
How a Pension Counts as Income
A pension counts because FHA does not ask for a paycheck. It asks whether your income is documented, current and likely to continue. HUD’s Handbook 4000.1 information page is the controlling source for FHA policy. The handbook’s glossary treats pensions, 401(k) distributions and Social Security as retirement income.
In practice, the proof is plain. Lenders typically want an award letter or benefit statement from the payer. Many also ask for bank statements that show the deposits, and sometimes a tax form such as a 1099-R. The point is to show the payment is real and steady.
Income Types at a Glance
| Income type | Usual proof | The lender’s main question |
|---|---|---|
| Pension | Award letter, deposits | Will it continue? |
| Social Security | Benefit letter, deposits | Is the amount current? |
| IRA or 401(k) draws | Statements, pattern of draws | Is the balance enough to last? |
| Annuity | Contract, deposits | Does the term outlast the loan review? |
| Part-time work | Pay records, returns | Is it stable? |
Pension plus Social Security is a common pairing. Each is documented on its own, then the lender adds them together. For a closer look at that combination, Lendmire has a piece titled FHA Cash-Out Documentation for a Retiree on Pension and Social Security.
The Pension Variations That Trip Files
Not every pension is simple. These are the cases where lenders look harder:
- Survivor or spousal benefits. The question is whether the benefit continues. A benefit with an end date may fall short.
- Pensions with a finite term. If payments stop within the period the lender reviews, the lender may not count them.
- Pensions not yet started. Income that has not begun may count only when specific conditions are met. Ask the lender early.
- Lump sums and fluctuating draws. These are treated differently from a fixed monthly check. Lenders look at the balance and the draw pattern.
- Non-taxable income. Some lenders adjust non-taxable income upward when they count it. Practice varies, so ask what the lender does.
For comparison, conventional guidelines spell out continuance tests in their own detail. The Fannie Mae Selling Guide accepts several proofs for pension income and lets the lender judge continuance from the plan’s terms when the papers are silent. That is a conventional rule, not an FHA one. It does show how much the paperwork matters on either path.
The Equity and Occupancy Tests
An FHA cash-out reaches 80% of the home’s appraised value, and that cap includes the payoff of your current mortgage. If you hear 85% from someone, the information is out of date.
That 80% figure is a ceiling, not a target. Several things come out of it before you see any cash:
- Your current mortgage payoff.
- Closing costs you choose to finance.
- The upfront mortgage insurance premium, which is 1.75% of the base loan and is typically financed.
What is left over is the cash to you. A retiree with a paid-off home has the most room. A retiree with a small balance has a good deal of room too. Someone who has refinanced several times may find little left.
Occupancy matters as well. The FHA cash-out is for the home you live in. Across the wholesale programs Lendmire places files with, the home must be owned and occupied for 12 months before the case number is assigned. The lender also reviews your mortgage payment history. Second homes and rentals do not qualify for this program; occupancy decides the leverage.
A Worked Example With No Dollar Figures
Picture a retiree who lives on a fixed pension and a Social Security check. The home has been paid down for years, and the owner lives in it full time. The goal is to pay off a home-improvement loan and a couple of credit cards.
Here is how the file is read. The lender starts with the appraised value and caps the new loan at 80% of it. The existing mortgage balance comes out first. The financed upfront premium and any financed costs come out next. What remains is the cash available.
Then the lender asks the affordability question. It adds up the pension and Social Security, then compares them to the new housing payment and the retiree’s other monthly debts. The base FHA ratio pair is 31/43. That means housing costs about 31% of gross monthly income, and total debts about 43%. With documented compensating factors, such as reserves or a strong payment record, the ratios can reach 40/50 at the top tier. An automated finding governs most files.
Here is the part retirees tend to miss. A cash-out replaces the old loan with a larger one. The payment may rise, and the term may reset. The CFPB makes this point in its guide to using home equity for older Americans. It also notes that lenders typically want 10% to 20% of the home’s value left as equity. A pension rarely grows. So the question is not only whether the new payment fits today, but whether it fits in ten years.
If the answer is “barely,” that is a signal to borrow less or to look at a different tool.
Credit, Ratios and Mortgage Insurance
Across the wholesale programs Lendmire places FHA loans with, the credit floor starts at a 580 decision score. Some lenders set a higher floor, and others weigh the full file more heavily. Programs differ, so a broker’s job includes matching your profile to the right one.
Mortgage insurance is part of every FHA loan. It has two parts:
- An upfront premium of 1.75% of the base loan, which is financed.
- An annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
Here is the retiree-relevant detail. On a thirty-year loan above 90% LTV, the annual premium lasts for the loan term. At or below 90% LTV, it ends after eleven years. Because a cash-out tops out at 80%, the eleven-year schedule is the usual one. Even so, the premium adds to your monthly cost for a long time. Confirm the exact tier with the lender, since it depends on the details of your loan. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
County loan limits apply to FHA loans. They change each year, so check the current limit for your county.
FHA Cash-Out vs. the Alternatives
An FHA cash-out is one tool among several. Which fits depends on what you want to do.
| Option | What it does | Fit for a retiree |
|---|---|---|
| FHA cash-out | Replaces first mortgage, up to 80% LTV | Flexible credit; adds premium |
| Conventional cash-out | Replaces first mortgage | Often needs stronger credit |
| FHA Streamline | Refinances an existing FHA loan, no appraisal | Cuts cost, but not for big cash |
| FHA rate-and-term | Refinances with an appraisal, up to 97.75% | Changes terms, little cash |
| HELOC or home equity loan | Adds a second lien | Keeps the first loan intact |
If your current loan is already FHA and you only want a better structure, the Streamline is a different product. It uses no appraisal and has a net tangible benefit test, and the premium continues. It is not built for pulling out cash. A retiree whose existing mortgage is the thing worth keeping should look at the second-lien route instead. Lendmire’s piece HELOC vs Cash-Out Refinance for a Retiree on Pension Income covers that tradeoff.
A reverse mortgage is another route. It has its own income and residual-income review and is a different product from a cash-out. The CFPB guide above contrasts the two.
The Cost of Resetting the Loan at Retirement Age
A cash-out is not free money. It is a larger loan. Three costs deserve a hard look.
A longer clock. Refinancing into a new thirty-year term resets your payoff date. A retiree who was five years from owning the home outright may be signing up for a payment that runs far longer.
A bigger balance. The cash you take is borrowed against the home. That reduces the equity you hold, which matters for heirs and for any later move.
Home-secured debt. The CFPB has noted that turning other debts into home-secured debt can put the home at risk if payments become unsustainable. Paying off credit cards with a cash-out can look smart. It trades an unsecured debt for one backed by your house.
CFPB research also found that paying off other bills or debts was a common reason borrowers took cash out, followed by home repairs. Both are reasonable. The test is whether the new payment holds up on a fixed income.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What the Lender Looks For
Every consumer mortgage must meet an ability-to-repay standard. The CFPB’s Ability-to-Repay compliance guide lists the factors lenders weigh. They include the income or assets you rely on, the new payment with taxes and insurance, your other debts, and your credit history. Income has to be checked against reliable records. This is why the award letter and bank statements matter so much.
Notice what the list centers on: the income or assets you rely on to repay, not necessarily a paycheck. Retirement income and assets can count toward that showing. A retiree with solid documentation can be evaluated on the same factors as a worker with pay stubs.
What Commonly Stalls Retiree Files
- A pension letter that is out of date or missing the payment amount.
- Deposits in bank statements that do not match the letter.
- Retirement-account draws with no clear pattern.
- A recent late payment on the current mortgage.
- Not enough equity once the payoff and costs are subtracted.
- A title issue, such as an ex-spouse or a deceased owner still on the deed.
Co-borrowers deserve a note. A non-occupant co-borrower is allowed on FHA purchase loans, and a spouse or adult child’s income can strengthen a file. A spouse who is not on the loan should still be discussed early, because title and state rules can affect who signs. Raise estate and title questions before the application, not at the closing table.
When a Broker Helps, and When It Doesn’t
A broker earns its place when the file is not simple. Pension plus Social Security plus IRA draws, a recent credit blemish, or a home with title questions all fit that description. The broker can compare programs, tell you where the file is weak, and steer it to a lender whose guidelines suit it.
A broker adds less when the file is clean and you already know the lender you want. Going straight to an FHA lender can make sense then. The underwriting rules are the same. The loan is not approved any more readily because a broker handled it.
Consider also whether you need cash at all. If the real goal is a lower payment on an existing FHA loan, a cash-out is the wrong tool. If the goal is a single repair, a smaller second lien may cost less over time. A good broker will tell you so.
Documents to Gather Before You Apply
Start with these. Having them ready makes the file easier to review:
- Pension award letter or benefit statement, plus recent deposits.
- Social Security benefit letter, if you receive it.
- Statements for any IRA, 401(k) or annuity you plan to count.
- Recent bank statements.
- Your current mortgage statement and proof of insurance.
- Photo ID and details on everyone on the title.
- Any additional income documents the lender asks for.
Program figures here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off the old one and gives you the difference in cash.
Mortgage broker: A professional who takes your application and places it with a lender, but does not lend or approve.
LTV (loan-to-value): The loan amount as a percentage of the home’s appraised value.
DTI (debt-to-income): Your monthly debts as a percentage of your gross monthly income.
Likely to continue: The lender’s test that your income will last, supported by documents such as an award letter.
Frequently Asked Questions
Does the broker approve the loan?
No. The wholesale lender underwrites and approves it. The broker takes the application, assembles the documents and keeps the file moving. Approval depends on the lender’s guidelines, your credit, the property and a full file review.
Is a pension enough to qualify?
It can be, if the income is documented, current and likely to continue, and the new payment fits within the ratios. The lender also reviews credit, equity and payment history. The base ratio pair is 31/43, and documented compensating factors can reach 40/50.
What if I only have Social Security?
Social Security is retirement income under FHA’s definitions, so it can count on its own. The lender will want a current benefit letter and matching deposits. The same ratio and equity tests apply, so the payment still has to fit.
Can I use my IRA or 401(k) withdrawals as income?
Often, yes, but the proof differs from a pension. Lenders typically look at account statements, the pattern of withdrawals and whether the balance can sustain them. Steady, documented draws are easier to count than irregular ones.
Can I take cash out on a paid-off home?
Yes, if you meet the occupancy and ownership tests and the new loan stays within 80% of appraised value. A paid-off home leaves the most room under that cap. Keep in mind that the payment you add comes from a fixed income.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Single Family Handbook 4000.1 information page
2. Fannie Mae Selling Guide on pension and retirement income
3. CFPB guide to using home equity for older Americans
4. CFPB Ability-to-Repay and Qualified Mortgage small entity compliance guide
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-Out Income Documentation by Borrower Type and Income Source · Does an FHA Cash-Out Count Part-Time, Overtime or Social Security Income? · Can You Finance All FHA Cash-Out Closing Costs?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.