Mortgage Reserves Explained
Reserves are the savings you keep after closing. Here is how many months different programs look for, what counts toward them, and when reserves are not required at all.
What counts toward your reserves
The assets a lender will credit
- Checking, savings, and money market balances
- Vested retirement accounts, often counted at a reduced value
- Stocks, bonds, and mutual fund holdings
- Business funds, on at least one program, when the business supports it
- Gift funds toward reserves, allowed on a primary residence by at least one program
- A gift of equity does not count toward reserves
Reserves are counted in months
Retirement accounts can count
Some loans need no reserves
Business funds can qualify
More properties, more reserves
We check reserves up front
What Mortgage Reserves Are
Savings measured in monthly housing payments
Reserves are the money you have left after your down payment and closing costs are paid. Lenders measure them in months, meaning the number of monthly housing payments you could cover from your own savings.
How many months a program asks for depends on the loan and the file. A stronger file may need none, while a higher debt-to-income ratio, extra financed properties, or a nontraditional credit history can raise the requirement on at least one program.
Reserves do not have to be cash in a checking account. Vested retirement accounts, stocks, and other liquid assets can count, and on some programs business funds and gift funds count within limits. Your loan officer confirms the exact figure before you apply.
Why reserves matter for your approval
Reserves protect you and the lender by showing you can keep paying after closing. Here is how they work across the programs we offer.
Measured In Months
A reserve requirement is stated as a number of months of your future housing payment, not a single dollar target. Two months of reserves means two months of that payment held in your own accounts.
Some Loans Need None
On at least one second-lien program there is no minimum reserve requirement and no cash needed to close. Requirements depend on the loan type, so a single number cannot be promised for every borrower.
Higher DTI Can Raise It
When a debt-to-income ratio runs high, some programs ask for more reserves. On at least one program a higher debt-to-income ratio raises the number of months required.
Extra Properties Add Reserves
Borrowers who own other financed properties beyond the subject home are asked for additional reserves on several programs. The more financed properties you hold, the more a lender may want to see.
Retirement And Business Funds
Vested retirement accounts can count toward reserves, often at a reduced value. On at least one program, funds from a business you own can be used for reserves when the business can support it.
Gifts Have Limits
Gift funds can be applied to reserves on a primary residence under at least one program, but a gift of equity cannot be counted as reserves. Your loan officer will confirm what qualifies in your case.
Hear From Homeowners Like You
Frequently Asked Questions
Common questions about mortgage reserves.
Reserves are the liquid savings you still have after your down payment and closing costs. Lenders count them in months of your future housing payment.
It depends on the loan and your file. Some second-lien programs require none, while other loans ask for two, six, twelve, or more months. Your loan officer confirms the figure for your scenario.
Checking, savings, and money market balances, plus vested retirement accounts, stocks, bonds, and mutual funds. Retirement accounts are often counted at a reduced value.
On at least one program, gift funds can go toward reserves on a primary residence. A gift of equity, however, cannot be counted as reserves.
On at least one program, funds from a business you own can be used toward reserves when the business can support the withdrawal.
Additional financed properties beyond the home you are financing carry their own payments, so several programs ask for additional reserves to cover that risk.
Yes. At least one second-lien program has no minimum reserve requirement, and many strong files clear underwriting without extra reserves. It varies by loan and by lender.
Find out what you qualify for
Not sure how many months of reserves your loan will need? A quick conversation can map it out before you apply.
Get Pre-QualifiedReserve requirements, rates, terms, and program eligibility are subject to credit approval and to income and asset verification. Reserve amounts are set by the specific loan program and the details of your file, and they can change during underwriting. This page is informational and is not a commitment to lend. Not all applicants will qualify.