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Can I Build a Custom Home if I'm Retired but Have Savings?
Last updated: November 4, 2026
By the My Construction Path editorial team
Often, yes. Being retired doesn't rule you out of a construction loan, because lenders can count pension, annuity and Social Security income, and in some cases they can turn your retirement savings into qualifying income. What matters is that the income is documented, expected to continue, and enough to cover the permanent mortgage payment along with your other debts.
Can a retiree qualify for a construction loan?
Yes. Lenders look at whether you can repay the loan, not whether you still go to work. The Consumer Financial Protection Bureau's guidance on age and income sources (last reviewed August 18, 2022) says a lender generally can't deny your application because of your age, and can't refuse to consider pension or Social Security income. A lender can still weigh how much income you have and whether it will continue.
The bigger questions for a retiree building a custom home are practical ones: how your income gets documented, whether your savings can count, and how you'll handle a build that can run close to a year.
What retirement income counts toward a construction loan?
Most steady retirement income counts. Fannie Mae's Selling Guide section on annuity, pension, or retirement income (updated October 7, 2026) lists the kinds of proof a lender can use, including an award letter, a benefit statement, bank statements, tax returns or a 1099 form.
Common sources include:
- A pension from a former employer or the military
- Social Security retirement benefits
- Annuity payments
- Regular withdrawals from a 401(k) or IRA
- Interest and dividend income, with a history of receipt
The key test for account withdrawals is staying power. Fannie Mae's guide puts it this way:
"The lender must document that income is expected to continue for at least three years from the application date."
So if you draw from an IRA, the lender will check that the balance can keep those payments going for at least that long. Fixed payments like a pension usually need no minimum history. Variable withdrawals need a 12-month record, per the same Fannie Mae section as of October 2026.
Can I use my savings instead of a paycheck to qualify?
Sometimes. Fannie Mae has a separate path, called employment-related assets as qualifying income, that converts eligible retirement savings into a monthly income figure even if you aren't taking withdrawals yet.
Here's how the Fannie Mae Selling Guide section on employment-related assets (updated March 4, 2026) describes the math:
"The lender must divide "Net Documented Assets" by the amortization term of the loan (in months)."
"Net documented assets" means your eligible balances, minus any early-withdrawal penalty, minus the money you'll use for the down payment, closing costs and reserves. A few rules apply, per that section as of March 2026:
| Rule | What it means for you |
|---|---|
| Eligible accounts | 401(k), IRA, SEP or Keogh with unrestricted access, or a lump-sum retirement or severance payout |
| Not eligible | Inheritance, sale of real estate, stock options, lottery winnings, divorce proceeds |
| Loan-to-value limit | 70 percent, or 80 percent if the asset owner is at least 62 at closing |
| Loan purpose and occupancy | Purchase or limited cash-out refinance; principal residence or second home |
| Income history | No minimum history required |
This option fits the conventional permanent loan that many one-time close construction loans convert into. Not every construction lender offers it, so ask each one directly.
How does a long build affect a retiree's loan?
A custom build takes time, and your income has to hold up the whole way. According to the U.S. Census Bureau's Survey of Construction data on time from start to completion, contractor-built single-family homes took an average of 10.5 months from start to completion in 2025 (data as of 2025, the latest annual figures).
That matters in three ways:
- Payments during the build. Many construction loans charge interest on what has been drawn so far. Retirees often pay this from savings, so plan for it.
- Reserves. Money you set aside for the build or for reserves may reduce the savings a lender can count as income.
- Rising costs. A contingency fund helps you avoid tapping retirement accounts mid-build. See our guide to construction loan cost overruns.
Should I pay cash, finance, or do both?
It depends on how much of your nest egg you want tied up in the house. Here's a two-sided look:
| Approach | Pros | Cons |
|---|---|---|
| Pay cash for the build | No loan payments; no underwriting | Ties up savings; large withdrawals may raise your tax bill |
| Construction-to-permanent loan | Keeps savings invested; one closing | Income documentation; interest during the build |
| Use land equity plus a loan | Land you own can count toward your contribution | Land must appraise well; title must be clean |
| Sell your current home first | Frees up equity and simplifies qualifying | You may need somewhere to live during the build |
If you already own your lot, see building on land you own. If you're hoping to keep your current home until move-in, our guide to building before you sell covers the options. A tax professional can tell you how large withdrawals would affect your taxes.
What should I gather before talking to lenders?
Start with your income proof and account statements. A short list:
- Pension or annuity award letters and recent benefit statements
- Your most recent Social Security benefit statement
- The last two months of statements for every retirement and bank account
- Tax returns, if the lender asks for them
- Land documents, if you own the lot
- Your builder's contract, plans and budget
Frequently asked questions
Can a lender turn me down because I'm older?
Generally, no. Per the CFPB, lenders generally can't deny a loan or charge more because of your age. They can still require you to show enough income and assets to repay.
Does my income need to last for the life of the mortgage?
No. For retirement account withdrawals, Fannie Mae's guide asks lenders to document that income should continue at least three years from the application date.
Can I count my IRA if I'm not taking withdrawals yet?
Possibly. Fannie Mae's employment-related assets option can turn eligible retirement balances into qualifying income, after subtracting penalties and the money you need to close.
Can I build a second home or retirement home in another state?
Yes, in many cases. Fannie Mae's employment-related assets option covers second homes as well as principal residences, though construction lenders set their own rules for second-home builds.
Ready to plan your retirement build?
Tell us about your lot, your plans and how you'd like to fund the build. Get started at My Construction Path, and we'll connect you with lenders who offer construction loans for custom homes.
Rates, down payments, credit scores, loan-to-value limits and other terms shown here are examples for general information only. They aren't an offer of credit or a commitment to lend. Actual terms vary by lender, borrower and property, change often, and are subject to credit approval. Ask each lender for an official Loan Estimate before you decide.
My Construction Path is not a lender and does not make loans or credit decisions. Not all borrowers will qualify. Equal Housing Opportunity. Requirements vary by lender, loan program, and location. This article is for general education and is not a commitment to lend. It is not a quote of rates, payments, or loan terms.