Reserves
Reserves are the liquid assets a borrower has remaining after closing, typically measured in months of total mortgage payments (PITI).
Different loan programs and property types have different reserve requirements. A primary residence may require two months, while an investment property may require six or more. Reserves demonstrate financial stability and reduce lender risk.
Reserves are not the same as savings used for your down payment or closing costs. They are the funds left over after the transaction is complete. Retirement accounts and certain investments may qualify, depending on the program.
Why This Matters: Strong reserves can strengthen a borderline file and serve as a compensating factor during underwriting. Knowing your reserve position before you apply helps you plan and can improve your approval odds.
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