What is Reserves?
Reserves are liquid financial assets a borrower must have after closing, measured in months of mortgage payments, to qualify for certain loans.
Reserves are cash or easily liquidated assets that a borrower must retain after closing, typically expressed as a number of monthly mortgage payments. Borrowers encounter reserve requirements on jumbo loans, investment properties, and some government-backed programs. Watch for which assets count, such as checking, savings, retirement accounts, and gifts, and which do not, like equity in a car. The required amount varies by loan type, occupancy, and loan-to-value ratio. Reserves provide a cushion against unforeseen financial hardship and are verified during underwriting. Failing to meet reserve requirements can delay or deny approval.
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