What Are Reserves?
Reserves: Savings left after closing, measured in months of mortgage payments.
Reserves are the money you'll still have after paying your down payment and closing costs. Lenders measure them in months of your new housing payment (PITI).
What counts
- Checking and savings
- Stocks, bonds and mutual funds (sometimes at a discount for market risk)
- Vested retirement accounts, often counted at 60% to 70% of the balance
- Cash value of life insurance
Gift funds and money borrowed against the home usually don't count.
Typical requirements
- Conventional primary home: often none to two months, depending on automated findings
- FHA and VA: usually none for a one-unit home
- Jumbo: commonly 6 to 12 months
- Investment properties and DSCR: often 3 to 12 months, plus more for each financed property you own
Good to know
Even when none are required, reserves strengthen your file and can offset a higher debt-to-income ratio. They also cover your first surprise repair.