When you are looking to buy or refinancing an existing
property. Many lenders will be looking at how much you have in the bank. This
is important in the event something happens with your job to cover up to 6
months of your total mortgage payment.
When you are looking to buy, it is important to look at how much your total new payment will be including principal, interest, taxes, insurance along with any homeowner’s association dues and multiple that amount by six.
For homeowners who own more than one property such as
a vacation home or investment property. You want to keep in mind if you
refinance or buy another house. Lenders will want to see an additional two
months worth of payments for each additional property.
What qualifies as cash reserves? Anything that is
liquid such as checking, savings, cash value for insurance, if you have
retirement accounts or investment accounts then only a percentage from 60-70%
of that projected value can be used to simply strengthen your loan application.
How long do you need to have reserves? Lenders will
want to see the last two months of the account statements to show you have had
those funds there for this duration. Oftentimes, if you receive a gift from a
family member or a tax refund. You can leave the funds in this account for at
least two months and use this as your qualifying cash reserves.
Reference
Miller, P. (2018, September 22). Down payment and
closing costs are not enough: You need “reserves” to buy a home.
https://themortgagereports.com/26430/what-are-mortgage-reserves-and-how-much-do-i-need
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