There are three separate ways a retired buyer's income can be calculated, and they produce very different numbers. Most retirees are quoted the weakest one, because the lender ran the obvious calculation and stopped.
In Terravita, where the buyer pool skews heavily toward people living on distributions and assets rather than a paycheck, running all three is the difference between the home you want and the one the first quote allowed.
The three calculations
1. Fixed income, grossed up. Social Security, pension and certain annuity income that is not taxed, or is only partly taxed, can commonly be grossed up for qualifying purposes, because a lender is comparing your spending power to a payment made with after-tax dollars. Gross-up percentages vary by program and by how much of the income is actually non-taxable, so confirm rather than assume, but the effect is real and it is routinely left on the table.
Document it with your award letter, recent statements showing receipt, and a return or tax documents showing how it is treated.
2. Retirement distribution income. Withdrawals from IRA, 401k or similar accounts can count as qualifying income, subject to two conditions that mirror the tests applied to any variable income:
- History. A documented pattern of receipt, commonly measured over the recent past rather than assumed from an intention to begin withdrawing.
- Continuance. Evidence the account can sustain the withdrawals for a defined period forward, commonly three years or more. The lender will look at the balance against the withdrawal rate.
This is the one that surprises people. Simply having a large retirement account does not produce distribution income. Taking documented, regular distributions does. If you are planning a purchase and have not begun distributions, that conversation with your lender and your advisor should happen well before you write an offer, because starting them changes what you qualify for and has tax consequences worth planning.
3. Asset depletion. The lender converts verified liquid assets into a monthly figure over a defined period and qualifies you on that, ignoring your actual income entirely. For a retiree with substantial assets and modest reported income, this frequently produces the largest number of the three. Retirement accounts are typically discounted, often more heavily than taxable brokerage, and pledged assets generally do not count.
Run all three. They are not mutually exclusive in every case, and the right answer is whichever the file actually supports. A lender who quotes you on Social Security alone has done a quarter of the work.
What Terravita adds
Terravita sits in far north Scottsdale near Carefree, a gated community built around a private club and golf course, with a substantial share of seasonal and retired residents.
The club obligation is the item to settle first. Whether membership is mandatory for owners at your address is the question that decides how the dues are treated. Mandatory dues and minimums are counted as a recurring monthly obligation against whatever qualifying figure your structure produces. An initiation deposit is cash out of your accounts and generally does not count toward reserves.
For a retiree that second point carries extra weight. If you are qualifying by asset depletion, the deposit reduces the very balance your qualifying income is calculated from. Decide the club and the loan together rather than sequentially. Mechanics in How a Scottsdale Golf Club Membership Affects Your Mortgage Approval and the full stack in HOA Dues, Club Dues and Assessments.
Fixed income meets a fixed obligation stack. Association dues plus mandatory club dues are the part of your housing cost that rises over time independently of your mortgage. A fixed rate payment is stable; the dues around it are not. Ask for the association's assessment history and reserve study, because a thin reserve today is a special assessment tomorrow, and on a fixed income that lands harder.
Occupancy. Many Terravita buyers are seasonal. If this is a second home rather than a primary residence, that changes your down payment and pricing, and it means qualifying while carrying both housing payments. See Second Home or Investment Property in Scottsdale.
Appraisals in far north Scottsdale can face thinner comparable sales, and parts of the area involve well and septic systems that carry their own inspections on some programs.
A note on age
A lender may not decline you or reduce your terms because of your age. That is the law, and it is worth stating plainly because older buyers are sometimes made to feel otherwise.
What a lender may do is require documentation that your income will continue for a defined period. That is a continuance test applied to the income source, not to you, and it applies to a thirty-five year old with variable income exactly as it applies to a seventy year old with distributions. If anyone frames it as a question about your age, you are talking to the wrong lender.
When none of the three clears
If a conventional or jumbo loan works on any of the three calculations, take it. It is nearly always the cheapest money available. When it does not:
No-ratio. No debt-to-income test at all. Credit, assets, reserves and the property carry the file. Often a clean answer for a retiree with a strong balance sheet and complicated income.
A larger down payment. Lowering the loan amount lowers the payment and the ratio. Balance that against your reserve requirement, because spending reserves to fix a ratio can break the other test.
Non-QM and no-ratio financing price differently than agency financing because the risk profile differs. Run the comparison rather than assuming.
Before you write in Terravita
- Bring all three income pictures: award letters and statements for fixed income, distribution history and account balances, and full asset statements.
- If you have not started distributions, talk to your lender and your advisor before you do. The timing affects both qualifying and taxes.
- Ask in writing whether club membership is mandatory at the address, and get the current membership plan.
- Get the association budget, reserve study and assessment history, not just the current dues figure.
- Decide occupancy honestly, primary or second home, and size the down payment to it.
- Count reserves after closing, at the applicable discount, excluding the initiation deposit.
- Get fully underwritten, not pre-qualified. A pre-qualification is a calculator that will usually run only the simplest of the three calculations. An underwritten pre-approval means someone ran the one that actually fits you.
Why bring this file to us
- We run all three calculations, gross-up, distribution income and asset depletion, and use whichever supports the house. That single habit changes retiree approvals more than anything else we do.
- We model the club deposit against your reserves and your depletion calculation before you write the check.
- Broker model. Gross-up treatment, distribution continuance rules and depletion divisors vary meaningfully between investors.
- The full toolkit, agency and jumbo through asset depletion and no-ratio non-QM.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me your award letters, distribution history and asset statements before you write in Terravita, and I will run all three and tell you which one buys the most house.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Gross-up percentages, distribution continuance requirements and asset depletion calculations vary by investor and change over time. Club membership structures and association obligations vary by community; confirm current terms with the club and the association. Rates, terms, and program guidelines change and depend on credit approval, property appraisal, and other qualifying factors. Not all applicants will qualify. Non-QM and no-ratio financing carries different pricing and terms than agency financing. Consult your tax advisor before beginning or changing retirement account distributions.
