Fannie Mae Rules Allow Higher Calculation of Nontaxable Social Security Income

Fannie Mae rules permit lenders to add 25% to documented nontaxable Social Security income when calculating qualifying income. For example, a $2,000 monthly benefit could be counted as $2,500. While lenders may use a 15% shortcut, proving full tax exemption via Form 1040 line 6b allows for a higher calculation. However, Medicare Part B premiums may reduce the actual spendable income.

The change affects how lenders measure a retiree's debts against their income, potentially helping individuals qualify for a mortgage they might otherwise struggle to secure. This is because the rules give credit for income that remains untaxed.