Most mortgage programs were built around one assumption: that the borrower has a steady, taxable, document-trail income — a W-2, two years of consistent self-employment, a Social Security benefit, or a pension. When a borrower doesn't fit that mold, the system tends to deny them — even when the actual financial picture is exceptionally strong. Recently retired professionals, newly self-employed business owners, and borrowers with substantial retirement savings often run into this exact wall. They have the assets. They have the credit. They can comfortably afford the home. But the income on paper doesn't pencil. The IRA loan program solves this by using your IRA balance — divided by 36 months — as qualifying income. No distribution required. No age restriction. And it can stand alone or be stacked with W-2, 1099, bank statement, or other asset income. Below are two recent Oregon closings that illustrate exactly why this product matters — and how a flexible underwriting path can be the difference between a denial and a closing.
How the IRA Loan Calculation Actually Works
Before walking through the scenarios, it's worth pinning down the math, because it's simpler than most asset-based qualification methods. The lender takes your eligible IRA balance and divides it by 36. The result is your monthly qualifying income from that asset. That income can stand alone or stack with any other documented income source — W-2 wages, 1099 contracts, bank statement deposits, CPA-letter income, Social Security, pension, or other asset depletion calculations. There are two age tiers. Borrowers 59½ or older qualify on 100% of the eligible IRA balance — there's no early-withdrawal penalty exposure, so the lender treats the full balance as accessible. Borrowers under 59½ qualify on 90% of the balance, with a 10% discount applied first to account for early-access penalties. After the discount, the remaining 90% is divided by 36 to produce monthly qualifying income. A quick example: a 62-year-old borrower with a $450,000 IRA balance qualifies on $12,500 per month ($450,000 ÷ 36). A 48-year-old borrower with a $350,000 IRA balance qualifies on $8,750 per month (($350,000 × 90%) ÷ 36 = $315,000 ÷ 36). Both traditional and Roth IRAs are eligible. Multiple accounts can typically be combined. Inherited IRAs count. And — this is the part that catches most borrowers off guard — you don't have to actually withdraw anything. The qualification is based on the balance, not on distribution history. Your retirement account stays invested, untouched, and continues to grow while it's busy qualifying you for a mortgage.
Scenario One — Tigard, OR: The Newly Retired Couple Who Didn't Want a Tax Hit
Our first borrowers were a recently retired couple in Tigard, Oregon. They had both stepped away from successful careers in the prior calendar year and had received their final earnings — final paychecks, accrued PTO payouts, and a year-end bonus from one of their employers. Combined with the wages they had earned during the year before retiring, that meant their most recent tax return showed a substantial taxable income figure. They were buying a $650,000 home and putting down 50% — a $325,000 down payment, leaving a $325,000 loan amount. By every meaningful financial measure, they were exceptional borrowers: 800+ credit, ample reserves, a 50% down payment, no consumer debt, and a combined retirement nest egg approaching seven figures. But here's the friction. They were not yet taking Social Security. They were not yet drawing IRA or 401(k) distributions. And — critically — they did not want to start either one in the same calendar year they had received their final wages, because doing so would stack distribution income on top of an already high-earning year and push them into a meaningfully higher marginal tax bracket. Their plan, advised by their CPA, was to wait until the following tax year to begin Social Security and any retirement distributions, when their wage income would be zero and the tax cost of drawing on their accounts would be dramatically lower. A conventional underwriter looks at this scenario and asks: where is your continuing income? The wages are gone — they're retired. Social Security hasn't started. Distributions haven't started. The two-year average of W-2 income they could document was high but no longer ongoing, which conventional guidelines treat as 'declining income' that may not be sustainable. Most retirement-product programs require either a documented distribution history or an immediate start of distributions to verify income continuance — both of which would have triggered exactly the tax consequence they were trying to avoid. The IRA loan program solved it cleanly. We used a conservative combined IRA balance of $450,000 — across both a traditional IRA and a Roth IRA. Because both borrowers were over 59½, we used 100% of the balance. Divided by 36 months, that produced $12,500 per month in qualifying income. Their proposed monthly PITI on the $325,000 loan came in around $2,400. DTI: under 20%. Approval was straightforward. No distribution had to be initiated. No Social Security had to be started. No tax-year stacking. The retirement accounts continued to grow, untouched. And the borrowers closed on the home they wanted with the loan structure their CPA had specifically engineered to protect. This is a profile we see more and more often: high-net-worth retirees who have planned their drawdown strategy around tax efficiency, and who simply need the mortgage system to recognize their actual financial strength without forcing them to disrupt that plan. The IRA loan program does exactly that.
Scenario Two — Oregon City, OR: The Newly Self-Employed Borrower with an Inherited IRA
Our second borrower was a single buyer in Oregon City who had recently transitioned from W-2 employment into self-employment. She had been operating her business for less than two years — about 14 months at the time of her application. By every other standard she was a strong borrower: excellent credit, no consumer debt, a meaningful down payment saved up, and a clear business plan with growing revenue. But conventional, FHA, VA, and most non-QM bank statement programs require a minimum of two years of self-employment history. Some programs allow 12 months with significant compensating factors, but the consistent message from every lender she had approached was the same: come back when you have two years. What she did have, however, was a $350,000 inherited IRA — funds she had received from a parent's estate. She had no plans to liquidate it. Her retirement strategy involved leaving it invested. But the balance sat there, doing nothing for her mortgage qualification under conventional underwriting because there was no distribution history and she had no intention of starting one. She was under 59½, so we applied the 10% early-access discount: $350,000 × 90% = $315,000. Divided by 36 months, that produced $8,750 in monthly qualifying income from the IRA balance alone — without any distribution being taken, without her business income being required to support the qualification, and without a co-borrower needing to step in. The property was a primary residence in Oregon City priced at a level where her down payment combined with the IRA-derived qualifying income produced a comfortable DTI. Credit was a non-issue. Reserves were a non-issue. The closing was clean. What made this scenario notable is what didn't happen. She didn't have to ask a parent or partner to co-sign. She didn't have to wait another 10 months for her self-employment history to ripen. She didn't have to liquidate her inherited IRA. And she didn't have to compromise on the home she wanted by buying smaller. The asset she already owned — the IRA balance — was the qualification. This is the second profile that makes IRA loans uniquely valuable: borrowers in transition. Newly self-employed entrepreneurs, recently widowed spouses, career changers, and recent inheritors all face the same problem — their financial strength on paper doesn't yet match their financial strength in reality. The IRA loan program lets the asset speak for itself.
Why These Two Scenarios Look So Different — And Both Still Work
It's worth pausing to note how different these two borrower profiles are. One is a married couple in their 60s, fully retired, with a near-seven-figure combined retirement portfolio and a 50% down payment on a $650,000 home. The other is a single, under-59½ borrower in her 40s with a single inherited IRA and a self-employment runway under two years. Different ages, different family situations, different income structures, different down payment percentages, different home prices. What they share is the structural problem the IRA loan was built to solve: a strong asset base that conventional underwriting can't see because it isn't a paycheck and isn't a current distribution. The Tigard couple was avoiding distributions deliberately to manage taxes. The Oregon City borrower wasn't taking distributions because she was nowhere near retirement and had no need. In both cases, conventional and most government programs effectively penalize the borrower for not taking money out of an account they don't need to touch. The IRA loan flips that logic. The balance is the qualification. The distribution decision stays with the borrower and their financial advisor — exactly where it belongs.
What Else Stacks Cleanly with IRA Income
One of the most underappreciated features of this program is that IRA income doesn't have to be the only income source. It can stand alone, but in many cases the strongest qualification comes from stacking IRA income with another documented stream. IRA + W-2: a borrower with a $40,000 W-2 income and a $300,000 IRA balance can qualify on $3,333/month from wages plus $8,333/month from the IRA — a combined $11,666/month qualifying income. The W-2 alone wouldn't be enough; the IRA alone might not be enough; together they unlock a meaningful loan amount. IRA + 1099 / Bank Statement: this is the combination we used for several recent closings. A self-employed borrower with strong but volatile 1099 income pairs that with IRA income to smooth the qualification. Useful when the bank statement program alone produces a tight DTI. IRA + Social Security + Pension: a classic retiree stack. Social Security and pension provide a stable income floor; the IRA balance amplifies it. For retirees who were close to qualifying on Social Security and pension alone but came up short on a higher loan amount, adding IRA income often closes the gap. IRA + Asset Depletion on Other Accounts: for borrowers with substantial taxable brokerage accounts in addition to retirement accounts, the IRA can be qualified on the 36-month divisor while the brokerage assets run through a longer asset-depletion calculation. The two methods don't conflict. In practical terms: if you have an IRA balance and your initial mortgage application has come back tight, your loan officer should be running a stacked-income scenario. That's where this product really shines.
Who This Program Is Built For
From the two scenarios above and the dozens of similar files we've worked through, the recurring profiles are pretty consistent. The early retiree with a healthy portfolio. Left the workforce in their late 50s or early 60s, lives comfortably off savings, but doesn't yet have current W-2 or Social Security income to show a lender. The IRA balance tells the real story. The self-employed borrower with a high DTI. Successful consultant or small-business owner whose tax write-offs leave them with a slim taxable income. Stacking the IRA balance against 1099 or bank statement income often closes a stubborn DTI gap. The retiree who wants to downsize or relocate. Selling the family home, moving to a smaller place, possibly into a new state. Modest monthly income but substantial retirement accounts. Traditional underwriting looks at the income. This program looks at the full picture. The investor adding to a portfolio. Significant assets, structured income that doesn't fit a conventional box. IRA income alongside rental income or other assets unlocks non-owner-occupied financing without unusual workarounds. The borrower just shy of qualifying. Sometimes the math is almost there. DTI sitting at 53% when the limit is 50%. A modest IRA balance generates just enough additional monthly income to close the gap. The surviving spouse reestablishing financial independence. After losing a partner, many borrowers find themselves with a single income where there were once two — but often with inherited retirement assets. IRA income qualification offers a path to homeownership that reflects their actual financial strength, not just their household income.
Frequently Asked Questions
Do I need to be taking distributions to qualify? No. Qualification is based on the balance of your IRA — not your distribution history. Many borrowers haven't started distributions and still qualify. The balance alone is sufficient. Do I need to be a certain age? No. Borrowers under 59½ simply use 90% of the balance instead of 100%. There are no age restrictions, no retirement-status requirements, and no employment-status requirements. Can I use a Roth IRA? Yes. Both traditional and Roth IRA accounts qualify. Inherited IRAs also qualify, as the Oregon City scenario demonstrates. Can I combine my IRA income with other sources? Yes — and you usually should. IRA income stacks with W-2, 1099, bank statement, CPA-letter, Social Security, pension, and other asset-depletion methods. The strongest qualification often comes from stacking. What if I have multiple IRAs? Multiple accounts can typically be combined. The total eligible balance across accounts is divided by 36 to produce monthly qualifying income. Is there a minimum balance? There is no stated minimum, but the balance has to be large enough to generate meaningful monthly income when divided by 36. Your loan officer can quickly tell you whether the balance moves the needle in your specific scenario. What are the loan limits and property types? Loan amounts up to $3.5M. Up to 90% LTV on purchases, up to 80% LTV on cash-out refinances, with cash-out amounts up to $2.5M. Available for primary residences, second homes, and investment properties — purchase, rate-and-term, and cash-out refinance. What credit score do I need? 620 minimum. Higher scores price better. Does this affect my IRA after closing? No. Qualification is based on the balance at the time of application. Future distributions, contributions, or market movement do not affect the loan once it has closed. How is this different from a standard asset depletion loan? Standard asset depletion typically divides a broader pool of assets over a longer period — often the loan term (e.g., 360 months). IRA loans use a fixed 36-month divisor specifically for IRA balances, which produces a much higher monthly income figure and a cleaner qualification path.
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Bottom Line
The borrowers in Tigard didn't need a workaround — they needed a lender who could see what they actually had. The borrower in Oregon City didn't need to wait another year for her self-employment history to mature — she needed a program that recognized the asset she'd already inherited. In both cases, the IRA loan was the difference between 'come back later' and 'congratulations on your new home.' If your tax return doesn't reflect your actual financial strength — because you're recently retired, recently self-employed, intentionally avoiding distributions, or simply outside the conventional mold — there's a strong chance your IRA balance is the qualification you didn't know you had. At Lumen Mortgage, we structure these loans every week for borrowers across Oregon and California. Call us at 503-966-9255 or start your application at blink.mortgage/lumenmortgagecorporation. We'll run your IRA scenario, tell you exactly what you qualify for, and build a loan around the real financial picture — not just the paper one. NMLS #1498678. Licensed in Oregon and California.
