My lender says 'reserve requirements'? What counts as reserves?

What counts as reserves for my mortgage?

Your lender wants to see that you have money set aside beyond your down payment and closing costs. Reserves are liquid assets you can access quickly if needed during homeownership. Lenders typically require reserves equal to one to six months of your future mortgage payments, depending on your loan type and financial profile.

Cash in checking and savings accounts counts as reserves. Investment accounts like stocks, bonds, and mutual funds also qualify, though lenders may discount their value slightly since market values can fluctuate. Retirement accounts like 401(k)s and IRAs can count, but lenders often apply larger discounts since early withdrawals carry penalties. Money market accounts, certificates of deposit, and Treasury bills typically count at full value. Some lenders accept gifts from family members as reserves if properly documented. Assets that don't count include your primary home's equity, cars, or illiquid investments like collectibles. The exact reserve requirement depends on factors like your credit score, debt-to-income ratio, loan type, and whether you're buying a primary residence or investment property. Ask your lender for the specific reserve requirement for your situation and which assets they'll accept. They can walk you through how they calculate reserves and what documentation you'll need to provide.