What Is Reserves?

Reserves are the savings and liquid assets you must still have in your accounts after paying your down payment and closing costs. Lenders measure reserves in months of your total mortgage payment — principal, interest, taxes, and insurance.

If your full monthly mortgage payment is $2,400 and the lender requires 2 months of reserves, you need at least $4,800 in verified liquid assets after closing. Jumbo loans often require 6–12 months of reserves, while conventional conforming loans may require 0–2 months depending on credit score, property type, and number of financed properties.

Key Facts

• Measurement: Expressed as months of full PITI (principal, interest, taxes, insurance) payments
• Conventional loans: 0–2 months for primary residences; more for investment properties
• Jumbo loans: Typically 6–12 months of reserves required
• Accepted assets: Checking, savings, money market, stocks, bonds, retirement accounts (usually counted at 60%–70%)
• Not counted: Gift funds earmarked for closing, borrowed money, or unsecured credit lines

Frequently Asked Questions

Why do lenders require reserves?

Reserves prove you can continue making payments if you face unexpected expenses or temporary income loss. They reduce lender risk, which is why higher-risk loans like jumbos and investment-property mortgages demand more reserves.

Do retirement accounts count as reserves?

Yes, but typically at a discounted rate. Lenders count 60%–70% of your vested 401(k) or IRA balance to account for taxes and early-withdrawal penalties. Fully accessible savings and checking accounts count at 100%.