Finally — if the accounts consist of stocks, bonds, or mutual funds, those assets are considered volatile.

For this reason, lenders only use 70 percent of the value in retirement accounts to determine how many distributions remain.

Budgeting for homeownership and maintenance

There are more hurdles for seniors beyond just getting qualified. As is the case with any age group, purchasing a home adds more responsibility beyond the monthly mortgage payment.

You’ll need to budget for property taxes, homeowners insurance, and home owners association fees if applicable.

Homeowners are also on the hook for maintenance and repairs to the property. Or for paying someone else to take care of those things.

Ultimately, when it comes to financing a home purchase, seniors should understand that adding a mortgage amplifies financial risk.

Even those with high net worth can lose out by borrowing too much if the house fails to increase in value.

Reverse mortgages allow seniors to access the equity in their home via monthly payments made to the retiree. The interest is then deferred to when the loan matures.

Over time, the balance owed on the house rises, while the amount of equity decreases.

With a reverse mortgage, one borrower must be at least 62 years of age or older to qualify.

>> Related: Who should consider a reverse mortgage?

Fannie Mae senior home buying program

Both Fannie Mae and Freddie Mac, the two massive entities that regulate the housing market, have policies that allow eligible retirement assets to be used to qualify under certain conditions.

Fannie Mae lets lenders use a borrower’s retirement assets to help them qualify for a mortgage.

If the borrower is already using a 401(k) or other retirement account for retirement income, the borrower must demonstrate that the income received from that asset is going to continue for at least three years.

If the borrower is not already using the asset, the lender can compute the income stream that asset could offer.

Freddie Mac senior home buying program

Similarly, Freddie Mac changed its lending guidelines to make it easier for borrowers to qualify for a mortgage when they have limited incomes but substantial assets.

The rule allows lenders to consider IRAs, 401(k)s, lump sum retirement account distributions, and proceeds from the sale of a business to qualify for a mortgage.

Any IRA and 401(k) assets must be fully vested, and must be “entirely accessible to the borrower, not subject to a withdrawal penalty, and not be currently used as a source of income.”

Buy a home with investment money

As mentioned earlier, when retirement accounts consist of stocks, bonds or mutual funds, lenders can only use 70 percent of the value of those accounts to determine how many distributions remain.

Regardless of whether the income has a defined expiration date, lenders require retirees to document the regular and continued receipt of their qualifying income.

This is typically done using one or more of the following: letters from the organizations providing the income, copies of retirement award letters, copies of signed federal income tax returns, 1099 forms, or proof of current receipt via bank statement deposits.

Buy a home with a co-signer

One of the quickest and easiest solutions for seniors who are having trouble income-qualifying is to add a co-signer.

Some retired parents are doing this by adding their children to their mortgage application.

A child with substantial income can be considered alongside the parent, allowing them to buy a home even with no regular cash flow.

Fannie Mae has an increasingly popular new loan program for co-signers. The “HomeReady” mortgage program allows income from non-borrowing household members, like adult children, to be counted.

>> Related: Benefits of buying a home with a co-signer

Buy a home with non-taxable income

Another helpful solution for seniors is when it comes to non-taxable income.

Social Security income, for example, is typically not taxed. Most lenders can increase the amount of this income by 25 percent, also known as “grossing up”, when calculating monthly income.

Unfortunately, just because a lender is allowed to gross up non-taxable income, it doesn’t mean they have to. Further, they may choose to gross up by a smaller percentage, such as 10 or 15 percent.

Speak to your lender about how they calculate non-taxable income.

• Sizing down — Empty nesters may size down to minimize square footage, maintenance, and mortgage costs
• Physical challenges — Cleaning and repairs can become physically taxing. Many seniors purchase a new home to cut down on upkeep
• Supplementing fixed income — More and more senior citizens are finding it difficult to live on their fixed incomes. Retirees may decide to sell or refinance their homes, finance a new home purchase, and use the equity cashed out to supplement their income
• Moving to a new area — According to one survey, as many as 40 percent of retirees are venturing out of their home state looking for better weather, recreation, favorable taxes, and other benefits

If any of the above applies to you, it might be worth it to consider financing a home in retirement.

Michael could use the asset depletion method from his untouched 401(k) combined with the income he is already receiving from Social Security and his Roth IRA to qualify and borrow as much as possible.

He does not actually have to start dipping into his 401(k) to pay the mortgage, but this calculation shows his lender that he could rely on his 401(k) to pay the mortgage if need be.

Find the best mortgage lender

Most mortgage lenders have loan programs that make it possible for seniors and retirees to buy a home.

However, not all lenders are experienced in issuing mortgages to retirees.

Prior to choosing a lender, make sure to ask a few screening questions. You’ll want to know how the lender qualifies retirement income, as well as how they calculate qualifying income from assets.

A few questions asked upfront can help you find an experienced lender to process your application and get you the best deal.