Assets and Reserve Requirements

assets mortgage

When applying for a mortgage, a mortgage broker or lender will likely inquire about your assets, and more specifically, your liquid assets.

They’ll want to know what you’ve squirreled away in order to come up with a down payment, pay closing costs, and make monthly mortgage payments going forward once you close your loan.

Unless you’re relying on a documentation type that doesn’t require the verification of assets, it’s very important to make sure you’ve got plenty of assets in your personal accounts.

Not only that, but those assets will be need to be “seasoned” for at least two months in most cases.

Season Assets Two Months Before You Apply for a Mortgage!

Many prospective homeowners and those looking to refinance make mistakes when handling their assets prior to a mortgage transaction.

They may falsely assume they can just shuffle some assets from a friend or family member’s account into their own bank account without incident, then use them to qualify for a mortgage.

Unfortunately, this doesn’t fly with many banks and mortgage lenders because the money isn’t properly sourced or seasoned.

Banks and lenders want to ensure the money is truly the borrower’s money, and in the borrower’s account for several months before they’ll accept those assets as their own. If it just appears out of thin air one day, the lender won’t feel very comfortable about the legitimacy of those funds.

For example, attempting to use mattress money for your down payment likely won’t go over well. You might think, why not!? It’s my money, my hard-earned cash, why can’t I use it?

Well, the lender doesn’t know where that money came from if it just appeared in your bank account a couple days ago. Could you have taken out an undisclosed loan, borrowed money from someone, or acquired funds another way that could make you a riskier borrower than you appear? Sure and absolutely.

This is why mortgage lenders typically want to see that any assets used in the mortgage transaction are seasoned for at least 60 days. Put simply, this means providing two months of bank statements that show the funds being present in the account for that entire duration.

Why 60 days? Well, lenders will generally ask for the two most recent bank statements, which cover a span of 60 days, give or take. So anything that occurs prior to those two months of bank statements won’t be revealed to the lender.

For example, if you plan on using a specific bank account to verify your assets, you may want to move any necessary funds into that account 60-90 days before you apply for a mortgage. That way the money will be considered seasoned and the average daily balance of the account will be reflected as well.

The two most recent bank statements won’t show those funds transfers if they were completed 60+ days earlier, in a prior statement period.

And if the funds have been in the account for 60+ days, you shouldn’t need to source them beyond the bank account they’re in.

Conversely, if you move a sum of money into a bank account less than 60 days before you apply, the lender will see that deposit on the bank statement and likely scrutinize it. And more importantly, ask for the source of those funds. If you don’t have a good answer, your loan application could be in jeopardy.

This is why seasoning assets is so important. Once they’re seasoned in a verifiable account, they are considered sourced and should be accepted without further review.

Ultimately, lenders want to verify that the borrower has established a savings pattern, and that the assets are sufficient to support the mortgage payment. Or in the case of anything less than full doc, support the stated income.

They ask that they be seasoned so the borrower doesn’t falsely inflate their financial position to obtain a lower mortgage rate, or to borrow more than they can truly afford.

Asset Reserve Requirements for a Mortgage

If you get your hands on a rate sheet, or talk to a bank or mortgage broker, they’ll usually tell you how many months of reserves you’ll need to verify assets and qualify for a mortgage.

Asset requirements will be defined in terms of PITI (Principal Interest Taxes and Insurance), meaning you’ll need enough money to pay for “X” amount of months of mortgage payments including principal, interest, taxes and homeowners insurance.  And mortgage insurance, where applicable.

Reserve requirements will vary from bank to bank, and from mortgage program to mortgage program, but you can get a good idea of what you may need to provide for different property types.

– Owner-occupied residences typically require two months PITI in reserves, but may ask for up to six months. In some cases you might not need any though!

– For second homes, reserves can range between three to four months, but again, can be higher.

– On non-owner occupied properties, otherwise known as investment properties, reserves are usually six months PITI or more.

Reserves Needed for Specific Types of Loans

For Fannie Mae and Freddie Mac loans (conforming), reserve requirements vary based on credit score and LTV, along with property type.  They can range from as little as zero months to as much as 12 months, depending on the scenario.  As a rule of thumb, more risk requires more reserves.

There is no reserve requirement for FHA loans on 1-2 unit properties. However, 3-4 unit properties typically require three months of PITI.

For VA loans, there isn’t a reserve requirement unless it’s a 3-4 unit property, at which point six months reserves are required.  Additionally, three months of reserves are required for each rental property owned that is not secured by a VA loan.

For jumbo loans, reserve requirements can vary tremendously, from as little as six months to several years, depending on how large the loan is.

Allowable types of assets:

  • Earnest Money Deposit
  • Checking/Savings/CD/Money Market Accounts
  • VOD
  • Business accounts
  • Stocks
  • Bonds
  • IRA/401k and other retirement accounts
  • Gift Funds/Gift of Equity
  • Sale of Assets
  • Seller contributions

Ineligible types of assets:

  • Cash on hand
  • Undocumented funds (mattress money)
  • Sweat equity
  • Unsecured borrower funds
  • Illegally obtained funds

Some useful tips regarding using assets for a mortgage:

– Move money into a checking or savings account the minute you start looking for a property. This will allow those funds to be seasoned, and thus won’t require additional sourcing.

– Try to limit any activity (deposits, withdrawals, purchases, transfers) in said account(s) for the preceding months leading up to the mortgage application to avoid any unnecessary conditions or letters of explanation.

– Even if the mortgage company initially asks for bank statements, ask if a VOD will suffice. A Verification of Deposit (VOD) from your bank provides the overall balance of your account and your average balance based on the past two months. This may be better than providing bank statements, which could show payroll and other information that you may not want to disclose.

– You may also use retirement accounts, but lenders typically only consider 70% of the total, so factor that in to ensure you have enough to cover reserves. *This can vary based on your individual lender’s guidelines.

– If you plan on using business accounts for assets, you’ll likely need to be the 100% owner. Although if you own only 50%, some lenders will accept a CPA letter stating what percentage the borrower has access to, and that the use of those funds won’t affect the business negatively.

– If you sell personal assets, make sure you save receipts to prove the source of funds. Acceptable items usually include automobiles, coins, art, and antiques.

– Generally you can use money from a joint account for reserves and down payment, but you’ll typically need to provide a letter from the other account holders explaining that you have full access to the funds.

– If you have any recent large deposits (usually defined as one that exceeds 50% of total monthly income) in your accounts, they may be scrutinized and/or unavailable for underwriting purposes depending upon their size.

Tip: At the end of the day, make sure assets are in personal accounts and seasoned long before applying for a mortgage! It makes life easier for everyone.


  1. Jeremiah July 18, 2013 at 12:04 pm -

    I learned the hard way that depositing a ton of money into a personal account at the last minute doesn’t suffice. It needs to be seasoned for at least two months and if it’s a substantial amount, the lender is going to want to know the source of the funds. In other words, you need to shore up assets long before applying for a mortgage to avoid any scrutiny.

  2. Amelie July 20, 2013 at 5:56 am -

    You should also tell readers that jumbo loans typically require six months of PITI or more, seeing that they are larger loans and carry more risk.

  3. Stuart July 21, 2013 at 5:27 pm -

    Most portfolio loans (loans kept by the bank and not sold to Fannie/Freddie) require more than two months of PITI for asset verification. After all, they’re keeping the loans, so they actually want to know you’ll be able to pay back the loan if you lose your job.

  4. Lakesha August 15, 2013 at 8:27 am -

    This is one part of the mortgage process you don’t want to screw up. Put the money in an account and don’t mess with it. If you move anything or deposit a large amount during or right before the underwriting process, you’ll deal with a ton of red tape. Season those assets!

  5. Jane September 14, 2013 at 11:25 am -

    My lender wants me to have 6 months of reserve as I am buying a investment property. My daughter is loaning me the money to fund it and she wants her money back after closing. How long do I have to leave it in reserve after closing?

  6. Colin Robertson September 14, 2013 at 11:47 am -

    Once a loan funds and records, you can do what you want with the money, but gift letters specify that the money does not need to be paid back to the person who gave you the gift. And make sure the bank is okay with you using gift funds for reserves.

  7. Jane September 14, 2013 at 12:24 pm -

    Aprox. how long do I have to keep her money in my account before I apply for a loan? Thanks

  8. Colin Robertson September 14, 2013 at 1:32 pm -

    If you don’t want to use gift funds, your assets must be seasoned. Typically, banks will ask for your two most recent monthly bank statements for asset verification. Any sizable deposits that show up on these statements will be scrutinized by the lender, which is why it’s important to deposit money needed for reserves and/or down payment at least two months prior to applying for a mortgage. This way the deposit won’t be included in the bank statements you submit to the lender, which will make the funds seasoned.

  9. Steve November 12, 2013 at 10:58 am -

    Congratulations Jane, you’ve just admitted to bank fraud, in that you’re representing to the bank/lender that you have x amount of dollars in seasoned assets that you “OWN”, when in fact it’s only money your daughter is lending you to shore up this false asset account. It’s crap like this put the market where it is today!

  10. E. Briscoe January 15, 2014 at 1:43 pm -

    What are the asset requirements for an FHA loan?

  11. Colin Robertson January 16, 2014 at 2:02 pm -

    For FHA loans, you don’t need to provide asset reserves if it’s a 1-2 unit property. However, 3-4 unit properties typically require 3 months of PITI for reserves.

  12. Sierra February 26, 2014 at 11:02 pm -

    I’m applying for a mortgage on a $1,820,000 house; mortgage amount will be about $1,450,000. The lender says they require 18 months reserves. This seems quite high.
    Is it uncommon?

  13. Colin Robertson February 27, 2014 at 10:42 am -


    It’s not uncommon when it’s a super jumbo loan amount, aka over $1 million, nearly $1.5 million. Put simply, the lender wants to know you can actually make payments for a while on such a large loan.

  14. Karin Worthey April 29, 2014 at 12:13 pm -

    I’m applying for a refi of $300k on my primary residence that was appraised at $480K. I have no liabilities. I own 2 other homes free and clear. My credit score is 820. I have over a million in stocks, CD’s, etc., going back many years. I have a 25 year employment history with the same employer. WHY IS THE LENDER TREATING ME LIKE A CRIMINAL? What regulations have I failed to meet?

    Thank you.

  15. Colin Robertson April 29, 2014 at 12:56 pm -


    What are they asking for? What’s the problem?

  16. Cris May 21, 2014 at 6:51 am -

    Can I borrow money from my 401K to use for down payment for purchase of land if I don’t have the funds in bank account and list the 401K as an asset?

  17. Colin Robertson May 21, 2014 at 10:15 am -

    You might be able to borrow against the 401k to get the necessary funds, but the 401k loan payment may need to be factored into your DTI.

  18. Laurie May 22, 2014 at 11:07 pm -

    I have just been asked by my lender to supply six months reserve for an fha loan a week before closing, he is asking me to get a 12000.00 gift loan from my parents with documentation and then he says when we close I can give it back to them. I told him my parents don’t have 12,000.00 (originally he told me all we would need to close is 3900.00, he;s using the credit score as the excuse, it’s the same as when he pre approved us), anyway now he is asking if we will borrow it from him personally and then after closing we will pay him back. Does this sound fishy to you??

  19. Colin Robertson May 23, 2014 at 8:07 am -

    It’s possible that you would need a larger down payment (10% vs. 3.5%) if you credit score turned out to be below 580. Do those numbers add up in that respect? Gifts are normal, he probably assumed your parents had $12,000 to give you since they were originally on-board with $3,900…

  20. Brian May 24, 2014 at 3:38 pm -

    We have been pre approved for a $750k mortgage. We are planning on using a 80/10/10 mortgage. We have $30k in savings, $25k bonus added in two weeks and pulling $35k from an IRA to put towards down payment. We have over $200k in reserves, credit score of 775-780 and ann inc of $350k. Will taking money out of the IRA hurt our chances of qualifying for the loan?

  21. don anderson May 24, 2014 at 10:32 pm -

    my wife passed away unexpectedly recently, mortgage was in her name only (we never got round to adding my name) I have NOT contacted mortgage co. yet to her passing, my fear is they’ll insist on a new loan in my name rather than just taking over existing loan. I only work part time, so I’m income poor but I have assets (stocks, bonds, mutual funds ) over 200K current loan amount due is 140K. any advice? and any chance of qualifing for a loan with the amounts i supplied? thanks.

  22. Colin Robertson May 25, 2014 at 4:50 pm -


    Why are you pulling money from your IRA if you have over $200k in available assets?

  23. Colin Robertson May 25, 2014 at 5:32 pm -


    Sorry for your loss. This is a pretty complex situation with a lot of variables, so speaking with a lawyer/estate planner might be advisable. It sounds like you’d have trouble qualifying for a new loan on your own, so a refinance might be tough, though it could be worth exploring if the current rate is significantly higher than today’s rates. With regard to the current loan, the Garn-St. Germain Act may provide you with some rights to continue making payments.

  24. Brian May 25, 2014 at 7:24 pm -

    Most of it is qualified money and stock options. Does that hurt our chances of qualifying?

  25. Colin Robertson May 26, 2014 at 9:06 am -


    As long as the source of the assets is acceptable, it shouldn’t affect qualifying. You mentioned that the bank already pre-approved you, so I’m assuming they already know where the money is coming from and are okay with it. Just make sure they fully understand your asset situation and also time everything properly to avoid delays as shuffling money can be time consuming.

  26. Caro June 2, 2014 at 11:46 am -

    My husband is applying for a mortgage and I am not included on the application because I am a full-time PhD student (to be done later this year) and have no job at the moment. He is close to being denied (at 51.5% instead of the required 50%). I own some valuable artworks and antiques and have a professional appraisal for each one – used for insurance purposes. Can I give or sell my husband these assets to help him get the loan for our house? If not, can he claim my retirement account as an asset without me being on the application? Thank you!

  27. Colin Robertson June 2, 2014 at 4:40 pm -


    You can ask if they’ll consider the antiques and artwork as a compensating factor, or alternatively try to get the DTI lower by buying down the interest rate and/or get a gift to lower the loan amount. Your loan rep should be discussing ways to rework the loan to make it eligible.

  28. Arvind June 17, 2014 at 8:32 pm -

    My closing is on June 19 and today on June 17th the mortgage broker said that the mortgage insurance is asking for seven months reserve of $24000

    So i sent him my 401k statement which has $29k. Do you think that should be fine?(FYI, I also took a loan from my 401k for the amount of 20k for making down payment, so the available 29k is after the loan amount)

    Also why is mortgage insurance asking me for seven months reserve, while the lender bank already said its clear to close.

    As per the broker he said once the mortgage insurance reviews your seven months reserve evidence then they should be able to provide me with a HUD statement.

    Now I just have one day left to close, should that be fine, for things to sort out?

  29. Colin Robertson June 17, 2014 at 9:34 pm -


    The mortgage insurer has its own underwriting guidelines. Retirement assets may be discounted to account for market volatility and early withdrawal penalties, so I don’t know if you will have a sufficient amount of reserves. You should be speaking with your broker regarding this matter to ensure you have enough funds to close. He or she should know.

  30. Debra June 26, 2014 at 8:06 pm -

    My husband and I applied for an fha loan the underwriter is requiring a 3 month reserve is this okay and why

  31. Colin Robertson June 27, 2014 at 9:38 am -

    They wouldn’t be asking for it just for the sake of asking, so it’s probably “okay.” Maybe it’s a 3-4 unit property? Or a compensating factor for a high DTI ratio. Ask them why!

  32. Maxi August 14, 2014 at 10:54 pm -

    I have conventional loan and an investment property( 2 units) which has >30% equity . initial request was 6 months reserves on investment only . I presented all that was requested., now they came back from underwriting ,they are requesting 12 months reserves on both investment and purchase. I am putting down 20% ,credit score is 729. I also have all liquid assets they are requiring she is also requesting I verify 10,000 that has been in account since 5/09/14 which is 3 months ago which I received from a tax return ..Are there guidelines that are in place stating that with Freddie and Fannie loans if there is more than 30% equity that you shouldn’t need more than 6 months reserves ? My closing date has come and gone and I feel as if I am being jerked around .what is your take on this?

  33. Colin Robertson August 15, 2014 at 9:58 am -


    The required reserves can depend on the bank and the loan program and what the underwriter discovered when looking at your loan file. It sounds like you have the money and they’re in the process of reviewing some of the funds. If your principal residence is pending sale or converting to a second home/investment property, there could be additional required reserves, which is based on whether the current principal residence has 30% equity or not, but that doesn’t sound applicable to your situation.

  34. Hope August 19, 2014 at 2:26 pm -

    We have a loan for a 1Mil. They are asking for a 12 month reserve. We have a lot in stocks, they are asking us to have Cash in Bank. Do we really need to extinguish our stock to show we have money on reserve, or should the stock be enough?

  35. Colin Robertson August 19, 2014 at 5:23 pm -


    Stocks are considered liquid financial assets, but the particular jumbo lender you’re working with might want to know you’ve actually got some cash savings in the bank as well seeing that they’re giving you a $1 million loan. If you’ve only got investments and no or minimal savings, the underwriter might be hesitant. However, you shouldn’t have to sell your stock…ask them what works and go from there.

  36. John August 23, 2014 at 10:21 pm -

    I am buying a $236,000.00 home in Cook County, Illinois. I am putting 5% down. It will be an owner occupied home. My front end ratio is 17% and my back end ratio is 44%. Credit score is 755. How much in reserves do you think Chase will ask me for? I am a current Chase customer. Thanks in advance of your help. Your comments are very helpful.

  37. Colin Robertson August 25, 2014 at 9:58 am -


    It depends what the automated underwriting comes up with, but with your high credit score on a primary residence you might not need any. But it’s always good to have healthy reserves to strengthen your application.

  38. David Smith September 2, 2014 at 7:20 pm -

    I am an unusual case in that I am a bond trader/investor. In my smaller taxable account over the past several years I have averaged around $15,000 per annum. That in addition to my Social Security of $12,000 annually. However, I do most of my trading/investing in my IRA account and that is presently around $1,650,000. I have a liquid net worth of $1,775,000 and debt free. I am thinking of buying a vacation home for around $279,000 and putting around $140,000 down. I would just buy it outright but don’t want to dip too much into my IRA because of the taxes. Am I going to be told my income is too little to qualify even though I have over $1,600,000 in my IRA?

  39. alan September 2, 2014 at 10:24 pm -

    I believe I have a good credit score and plan on using a combination of hardship withdrawal on my 401k and a giift amount from my parents. Unfortunately I have been very bad at saving beyond my 401k contributions, however i do have a good credit score. Will i be questioned on my spending history and do you think it will affect getting approved for a first time residence purchase? My spending has not incurred substantial credit debt.

  40. Colin Robertson September 3, 2014 at 10:17 am -

    It certainly helps to have your own assets set aside for the purchase of a home, but if you have low debt and good credit, you might not need much if anything in reserves. Not sure why a lender would question your spending history unless you have lots of associated debt.

  41. Colin Robertson September 3, 2014 at 10:20 am -

    It’s quite possible you could run into some issues but there are a lot of portfolio programs nowadays for individuals with limited income but a ton of assets. Or perhaps you could put more money down to get the monthly payment below DTI cutoffs.

  42. claudia November 17, 2014 at 2:13 pm -

    Hi Colin
    I have a question I’ve been told that my fha loan has been conditionally approved however my broker is asking if i have more money for downpayment some of my downpayment was gifted with all required docs being presented and the remainder I provided why is my broker asking for more money and if have been conditionally approved will I get the clear to close

  43. Colin Robertson November 18, 2014 at 10:18 am -


    You may want to ask your broker why he’s requesting more money down. Could be that the underwriter wants to see more funds to approve the file.

  44. Erin November 23, 2014 at 7:32 pm -

    Hi. I am about to start searching for a home. I’m planning on withdrawing $10,000 from my IRA to fund my down payment on my first home. I will have funds left in the IRA and in a 401k. I’ve been working on paying down debt and haven’t saved as a result. Should I withdraw the IRA funds now to have it season in my bank account? The only catch is that I can avoid a 10% penalty on the $10,000 hardship withdrawal if I use the money for the purchase of a home within a prescribed period of time, so I don’t want to take it out to soon. Also, do I need to have this money in my savings account to get pre-approved? My credit score is 759.

  45. Colin Robertson November 24, 2014 at 1:12 pm -


    The IRS rule provides a 120-day window to use the IRA distribution for a home purchase without penalty. The funds in an IRA don’t need to be moved into another account for a certain period of time if they’re already seasoned. A paper trail documenting where the funds were transferred from should satisfy the seasoning requirement.

  46. Bob January 4, 2015 at 10:35 am -

    Can a documented personal loan with interest payments be used as an asset/income when qualifying for a mortgage?


  47. Whitney January 4, 2015 at 1:07 pm -


    We are a very young couple with two toddlers. My husband makes 120k a year, has averaged 30k in vested stocks per year, with another 150k in stocks vesting every 4 months through 2016. We have 20k in savings, 45k in retirement, and 20k in equity on a rental property that earns us 300 per month after paying the mortgage. We are worried about securing a decent mortgage when we move in four months due to lack of cash on hand. My father has pledged a gift of 25k to help with either a down payment or reserves. How do unvested stocks help or hurt our mortgage application? Any advice on preparing for the application process?

  48. Colin Robertson January 5, 2015 at 11:01 am -

    Generally, retirement accounts must be vested and available for withdrawal to count toward reserves. If you’re concerned about eligibility, obtaining an early pre-approval might be smart to avoid any surprises late in the game.

  49. Colin Robertson January 7, 2015 at 5:03 pm -

    Per Fannie Mae guidelines, personal unsecured loans are not an acceptable source of funds for down payment, closing costs, or reserves. There are similar guidelines for other types of mortgages based on the idea that you can’t get a loan to get another loan.

  50. Dave January 21, 2015 at 7:38 pm -

    Started working with a Real-Estate Broker after pre-approval for apartment loan. I have the 20% down payment and some in reserve, however the broker seems unsatisfied. The issue seems to be that I am expected (by the broker) to have at least another 15-20% of the price of the apartment in reserves. Also these reserves should not include investments which could suffer from early withdrawal penalties, i.e. 401K, IRA, etc. Is this a real requirement? Are potential buyers expected to have 2xDownpayment? How much is a potential buyer expected to put aside from the initial downpayment?

  51. Colin Robertson January 21, 2015 at 8:35 pm -

    Hey Dave,

    This asset page isn’t geared toward multifamily loans for apartments, but mortgage lenders do discount assets that can suffer from early withdrawal fees, penalties, taxes, etc. It’s real.

  52. Dave January 21, 2015 at 9:23 pm -

    Thanks Colin,

    This is for a 1 bedroom apartment. I’m wondering if after making a downpayment of 20% having another 20% (same amount) in savings is commonly required when purchasing an apartment?

  53. Colin Robertson January 22, 2015 at 11:21 am -

    I wouldn’t say it’s common because that’s a lot of money to have on reserve. Generally it’s a couple months of reserves to make mortgage payments.

  54. Miguel February 3, 2015 at 5:51 pm -

    I have plenty of seasoned and unseasoned funds, but prefer to use the unseasoned funds from a different bank account. Once I’m clear to close, can I use the unseasoned funds? I still have the seasoned funds, but would rather not mess with them as they are part of my retirement fund.
    It’s not a question of whether I have enough funds, which luckily I do, it’s whether they have to be from the seasoned sourced account.

  55. Colin Robertson February 4, 2015 at 12:32 pm -

    If funds aren’t seasoned, they could potentially be an undisclosed gift or a loan or something else that might not fit the underwriting guidelines. But your broker/lender should be able to structure the deal in a way that is optimal for you.

  56. Esteban February 10, 2015 at 8:52 am -

    We were recently pre approved for a 260K mortgage on a new property were we would owner occupy the first floor unit of a double. We currently own a single family that we will be listing within a month. We owe 130K on that property. We are now 2 weeks into the process with inspections on the new property complete. However now the lender is asking for 18 months of reserves? Are reserves as simple as (2) monthly mortgage payments * 18 months? Also, isn’t that an extremely large reserve requirement?

  57. Colin Robertson February 10, 2015 at 10:43 am -


    It’s not uncommon for a lender to ask for that many months of reserves if you have multiple financed properties and if you’ve got limited equity in the existing property. Ultimately they want to know that you’ll be able to handle both mortgage payments for a while in case anything goes wrong with your finances. The reserves might be structured where you need X months for your current property and X months for the new property. Ask the lender for specifics.

  58. sharon February 16, 2015 at 12:58 pm -


    We are being asked at the last minute for reserves of 6 months on the property we are moving into as well as 6 months of reserves on the property we are moving from (even though we have a signed lease agreement…we have 3 other rental properties and plan to use the home we are moving from as a rental property). First question, with our good credit and payment history why are we being asked for 6 months rather than 2 months worth of reserves? Second question, we are only short about $3,000; I have a credit card that has a $30,000 limit and offers 0% interest for 12 months on credit card checks. Can I write a credit card check to myself and deposit that into my account for the purpose of reserve cash?

  59. Colin Robertson February 16, 2015 at 6:22 pm -


    Probably need six months because you have less than 30% equity in current principal residence. Best to speak to your broker/loan officer about how to come up with the necessary reserves; personal unsecured loans are generally unacceptable.

  60. Sal March 1, 2015 at 9:21 am -

    Would a HELOC on our primary residence be allowed as reserves for an investment property?

  61. Colin Robertson March 2, 2015 at 1:11 pm -


    Secured borrowed funds like HELOCs are generally acceptable for reserves, but check with your lender to be sure.

  62. David March 11, 2015 at 11:38 am -

    Colin, we are buying a newly constructed, single family home, priced $195,000, and putting down $70,000. This loan will be in lieu of a bridge loan until our present home sells, no mortgage and Realtor valued at approximately $141,000. The builder offers $3,000 towards closing if we use their mortgage company, Pulte Mortgage, hence our considering a 30-year mortgage over a 1-year bridge loan from a local lender. Our credit score is 805. We have combined gross incomes of $76,000 annually, from pensions and social security. This covers our present expenses and some savings. In addition, we have $163,000 in IRAs and $35,000 in a 457 account. Our bank accounts, checking and personal savings, total $119,00, in anticipation of buying and selling expenses on the two homes. I moved $46,000 from my traditional IRA on December 30,2014, into our checking account. This was done to have enough liquid savings to fund our down payment, closing costs, and home upgrade expenses on the two homes. In order to track this transfer, I have furnished records of the movement from my IRA into our checking account. I intend to close the remaining traditional IRA, $45,000, as soon as Pulte Mortgage issues final approval of our loan. I will pay estimated taxes on this money and leave the rest in our checking account to further fund our upgrade and moving expenses. Pulte has now required over $8,000 in ASSET RESERVES. This seems to represent six monthly payments on the new mortgage loan. We are not very familiar with this terminology, not understanding if this means an escrow account or a letter confirming we have the funds. With our 36% down payment , no other debt, and above described financial condition, we are willing to walk away from this loan option over the $8,000. We don’t feel Pulte is incurring enough risk to justify the additional request. What is your opinion on this matter?

  63. Colin Robertson March 11, 2015 at 3:34 pm -


    It sounds like they are just asking for proof of reserves (common request), meaning documentation that you have that amount of cash on hand.

  64. Jay Hynz March 12, 2015 at 4:15 pm -

    My loan officer is asking for $2000 more in reserves. He initially told me that I only needed $3800 to close. Is this the underwriter’s recommendation? Can I apply for a loan from my bank to cover the reserves?

    I do have a check that I am hesitating to deposit for a totaled car towards the reserves plus two gift letters. would that sufficient enough?

  65. Colin Robertson March 12, 2015 at 5:30 pm -


    Probably best to ask your loan officer why you need more and what will be sufficient to cover it.

  66. Dom March 13, 2015 at 5:58 am -

    Hi Collin

    I have 800k deposit on a 2.2m house, the house was purchased 2 years ago in its pre construction stage, I also have 700k reserves (stocks included)

    My loan is 1.4m and pre approved

    During those 2 years my business income has declined significantly but i can still afford loan payments. Im sure this will bring alarm bells to the underwriter.

    Will this be a problem with the bank in the final stage of loan approval?

  67. Ramon frias March 15, 2015 at 4:22 pm -


    You stated that in 1-2 unit homes with theFHA loans, do not require any reserves correct?

    My lender pre-approved me with a credit score of 640, with only $3,500 cash to close. Now they have, a month before closing have required me to have 3 months in reserve. Why would they require this with an FHA loan?

    I know the more obvious thing to do is speak to my lender, but they have been horrible at responding & overall communication. Your input would be highly appreciated.

  68. Colin Robertson March 16, 2015 at 9:20 am -


    That’s a HUD guideline. It could be that your credit is low or reserves are needed as a compensating factor. Best to ask the lender…they should get back to you!

  69. Colin Robertson March 16, 2015 at 9:40 am -


    It could be, best to speak with your loan officer/broker. They might ask for a letter of explanation if your income has really tanked to better understand why.

  70. Jane Grayson March 28, 2015 at 8:19 am -

    Thank you for this great source of information regarding loans. I have been “pounding the pavement” for a loan, not realizing how many problems there were, until I came up to it with a lender. This is investment property. And lenders stopped at the first one they came to. First was the LTV. That is difficult if you do not agree with the estimated value of the property. For me, that improved over time. The real problems for me is debt/income ratio and the reserve that has been requested. Up through 2013, my ratio was well over 60%. There had been some maintenance that needed attention and this became part of a negative balance regarding income from the property. In 2014, there is still a small negative income for two units due to my current mortgage situation. I have a private second mortgage that I wish to pay off. I can improve my ratio, if I can refinance my first and second plus pay off a credit card balance, down to 46%. This could still cause a problem and time may also help here . But the real problem is the reserve. After all my calculations with PIT, etc., on a possible scenario, I come up with approximately $1800. The requested reserve is six times, which comes to $10,800. You need to believe that if I could come up with that kind of money, I would not need to refinance. And what is most interesting is that consistent good credit scores do not impact this requirement. My score is over 700, maybe 720, and this has been an on going score over a number of years. If you know of any way that this requirement can be mitigated, I would appreciate the information.

  71. Colin Robertson March 30, 2015 at 10:43 am -


    Perhaps shop around and speak to brokers to see if any lenders out there require fewer reserves based on your situation. Sadly good credit doesn’t replace the need for reserves when you own multiple leveraged properties.

  72. Dan April 1, 2015 at 9:56 pm -

    I’m trying to buy a duplex (or triplex) as an owner occupied property with a minimal(5%) down payment. I have good credit (780) and was quickly approved by my credit union, but they came back and said that the reserve requirement would be six months of monthly payments. I live in the rural Midwest and we’re talking $4200 in reserves after a $5000 down payment. Is this universal or maybe just a quirk of my credit union’s? Also, I understand that an FHA loan would only require three months in reserve, should that be something for me to consider or are there significant drawbacks? It doesn’t make sense to me that even though I’ll be living there this is still treated strictly as an investment property.

  73. Colin Robertson April 2, 2015 at 11:56 am -


    If you intend to live there as your primary residence, it should be treated as a primary residence, not an investment property. Reserve requirements may vary from bank to bank, but Fannie Mae requirements call for 6 months reserves on 2-4 unit properties. FHA might require fewer reserves but cost you more (reserves are just reserves, not actual money being spent).

  74. Mrs. Houston April 12, 2015 at 10:38 am -

    Hi! I have a question. I would like to know if we would need an cash reserve for an FHA loan that we were preapproved for? We have $5,000 down payment assistance, seller will pay all the closing cost and warranty. Taxes and insurance will be including in our mortgage payments. I was never told upfront about cash reserves…but the loan officer stressed that we save as much as possible. I was told by our real estate agent that when it comes down to it, we may need only about $2,000 to contribute to inspection, escrow, and appraisal. We won’t get back much of the money because of the program our loan officer signed us up for. Anywho, do you think we will need much in the bank? The loan officer said there’s no specific amount needed, just have something in the bank and now I am scared because after paying for the escrow and inspection, I doubt that we will have anything left in savings. We just started saving and only saved what we needed to have by closing. So what do you think? This is a house, primary residence, and just one unit. We shouldn’t need any reserves, but who knows what the bank will say!?!

  75. Colin Robertson April 12, 2015 at 6:35 pm -

    Hi Mrs. Houston,

    Best yo ask your loan officer what the reserve requirement is. It’s possible they may be needed if the loan was manually underwritten.

  76. Chuck Ulbrich April 14, 2015 at 3:43 pm -

    Quick question from a first time home buyer. We are in contract on primary home in contract for $194,400. It’s a conventional loan with 5% down and seller concessions of
    $5700. About a week ago we received an updated GFE and it had our out of pocket costs at closing down from the original GFE of $6308 to $4512. Today I was asked by the lender to verify liquid assets of $10,321.15. They said they already verified $6305 and now need to verify an additional $4015 for funds to close. Do you think this is what we will need for the close or is this just to make sure we have reserve funds beyond the close. I’m baffled as to how the GFE could be so far off.

  77. Colin Robertson April 14, 2015 at 8:41 pm -


    If you don’t understand why that number changed, ask so you know. Reserves mean the money is in one of your accounts, not that it’s being spent.

  78. Jane Grayson April 16, 2015 at 9:44 am -

    Hi Colin,

    Your answer to my situation was not unexpected and I have decided to do a little(!) research on Why/How? this requirement has been put into place. My trip led me to the Federal Reserve Board which then pointed into other directions. I have only touched the surface and will continue to plod through the internet in search of answers. In my search I DID go back to the Fed. Board and found they are looking for people interested in being on their Advisory Council that impacts consumers. If anyone is interested, just Google Federal Reserve and on the site he/she will find a reference to it.

    Jane Grayson

  79. Tony April 19, 2015 at 7:05 am -

    Hi Colin,

    This is some good info, but I had a question. First time home buyer here, and we were pre-approved for a community works mortgage through HSBC.

    On the preapproval it says “Provide documentation to verify funds have been liquidated in the amount of $7000”. Are they asking for a reserve with that wording or just that we have the money on hand for the closing and down payment?

    The home will be about 240k with 9-10% down on our part. The mortgage estimate will be about $1800 a month. I have a pension (public school) and a life insurance policy (through the school). Not vested in either one however. They will not take any of the monies in these accounts I take it?

    Just really confused with this reserve stuff and worried we might not meet their requirements and it might kill our chances of the loan. Any help would be greatly appreciated :-)

  80. Caliblu83 April 20, 2015 at 9:36 am -

    I have applied for an FHA loan, and I am receiving down payment assistance. I have my .5% down payment and I am getting a 3% seller credit and subordinate financing to cover closing costs. On my GFE my estimated contribution at closing was -$43.00. Here is my question, I only have a total of $3000.00. I had gone into contract one month prior to this current one and $1000.00 was withdrawn for that escrow, then returned when I canceled the contract. At that time I also paid for my inspections, so that was a $400.00 unrecovered loss. Now that I am in escrow again the $1000.00 was again withdrawn, and I have paid another $250.00 for inspections, leaving me with $1750.00 between my checking and savings account out of my original $3000.00. When this goes to the underwriter for approval, will they question why the $1000.00 went in/out/in/out? If they were to look at my checking right now today it is obviously low because of the recent escrow activity- but my loan officer knew going in I only had a specific amount of money- also, I want to confirm that asset verification includes the verification that I am getting down payment assistance and seller credit.

  81. Colin Robertson April 20, 2015 at 4:13 pm -


    They should be able to see the paper trail of the money going out and coming back in and why that happened. The underwriter should be aware that you’re getting the DPA and seller credit.

  82. Colin Robertson April 20, 2015 at 4:23 pm -


    Generally assets need to be liquid aka readily accessible to be used for reserves. Best to speak with your loan officer about specific amount needed and where it can be sourced from to meet the requirement of the bank/lender you’re working with. Good luck.

  83. Dwayne April 21, 2015 at 8:28 pm -

    Ive received preapproval for a home loan, and am providing all the necessary information ex. Pay check stubs, W-2’s etc in preparation for the closing.
    I have an IRA and funds from a joint savings account that I have with my mother. Can I use both for to show seasoned funds? I’ve had both for years.

  84. Colin Robertson April 22, 2015 at 8:36 am -


    They should be acceptable, though the IRA may be discounted to account for penalties/taxes and the joint account may require a letter that you have access to 100% of the account balance.

  85. Lori April 23, 2015 at 6:57 am -

    My partner of 14 years and I are splitting up. We have one child. As part of our settlement, he will be giving me $50k toward the purchase of a home, and $2000 in monthly support.
    My personal income averages 5k per month, and credit score is around 750. I’ve never had much of a savings because we had always planned on his retirement, so mine is under 20k.

    I have very little debt, and we also own a company together which is established since 2005, and annual revenue of 800k. I do have verifiable w-2 income from my salary.

    What advice would you have for my qualifying for a home in the $250 k range?

  86. Colin Robertson April 23, 2015 at 9:54 am -

    Hi Lori,

    Best thing you can do is get pre-approved to see where you stand and determine if there’s anything that might be perceived as a red flag to the lender. But great credit, steady income, and some assets and low debt is a good start.

  87. jo May 10, 2015 at 1:53 pm -

    We have a recent large deposit which is being questioned. that we wont be able to get documentation on. we have enough in the bank to cover the closing costs easily without counting the large deposit none of which can be questioned. do the banks just exclude the large deposit or trash the loan altogether?

  88. Colin Robertson May 11, 2015 at 9:58 am -


    The undocumented deposit should just be excluded from your qualifying assets.

  89. jo May 14, 2015 at 3:10 pm -

    thank you!

  90. rob June 14, 2015 at 8:50 pm -

    Hi Colin,

    I have a 457 retirement plan that does not allow withdrawals, however I can take a loan for an amount up to 50% of the account value. Can the availability of funds from such a loan count as reserves?


  91. Colin Robertson June 18, 2015 at 10:29 am -


    You might want to ask the lender you’re working with before taking out the loan just to be sure you don’t waste your time, but generally such funds can be used toward reserves.

  92. Darius Williams June 24, 2015 at 6:29 am -


    My wife and I took out an unsecured loan to buy property 15k, the property appraised for 31k, and we have the deed free and clear. My question is will the lender pay off that unsecured loan as a part of the new construction process? I’m trying to avoid it being calculated into DTI, we are trying to go the FHA route to build, any suggestions?

  93. Milissa July 10, 2015 at 5:31 am -

    I don’t understand why my bank refused to pre approve my mortgage for 309K when I have over 40 rental properties paid off and approximately 435k in my retirement savings. I was told that even though my credit is perfect, my local bank will no longer use assets as collateral????

  94. Colin Robertson July 10, 2015 at 11:35 am -


    Maybe the 40 rental properties scare them?

  95. Jan July 22, 2015 at 3:16 pm -

    Hi! I have applied for a refi (it’s a portfolio loan) with my boyfriend. We both have credit scores over 740, long job histories, good salaries, an anticipated DTI of 37% after refi, close to no credit card debt, over $200K reserves (50 months worth) in the form of my boyfriend’s investment account. Our house will have a CLTV of 75%. We are rolling closing costs into the loan. Will the lender bother doing a VOD on my bank account even though my assets aren’t needed for qualification purposes? Also, I have a large deposit I couldn’t avoid that I don’t feel like going through the rigamarole to explain.

  96. Colin Robertson July 22, 2015 at 11:07 pm -


    If you disclosed the account on the initial application they will likely want documentation, but if you’ve got more than enough seasoned assets elsewhere it shouldn’t be an issue.

  97. Stephanie July 25, 2015 at 7:57 am -

    My husband is purchasing a home and obtaining a VA loan. I am not on the loan due to my credit score. 1) Is he required to have reserves? and 2) can he use my 457 account as reserves?

  98. Colin Robertson July 26, 2015 at 7:12 am -


    For VA, reserves aren’t required for single-family homes and duplexes unless lender findings call for them.

  99. Aliyah1981 July 30, 2015 at 5:59 pm -

    Hi Collin, Im married, however Im obtaining a Conventional loan by myself for 150K with a 740 credit score. My husband and I have a joint bank account and he is going to deposit 6K from Vanguard for reserves. Can I claim this as a gift from him or no since he is my husband? Ive paid down almost all my debt therefore Im cash poor now and Im worried about seasoned reserves. I will only have around 2-3K in cash and around 5K in my 401k. My application will go into underwriting in the next couple weeks. Any suggestions?

  100. Colin Robertson August 2, 2015 at 12:40 pm -


    If gifts can be used for reserves it shouldn’t be an issue…otherwise maybe have him gift you down payment if only that’s allowed. Your LO should be able to provide guidance.

  101. Ann White August 8, 2015 at 10:38 am -

    We are currently in the process of an FHA/MSHDA down payment assistance mortgage approval. With MSHDA, they provide $7,500 for down payment assistance. The loan is underwritten thru the bank, then thru MSHDA. We recently sold our 35 year old mobile home for $4,000 cash. MSHDA is questioning these funds – we did a purchase agreement, but nothing official or notarized. We are holding onto title of home, in case mortgage does not go thru. MSHDA is requesting a formal affidavit. We will send this along with the filled out title and possible a copy of the buyer of our mobile home’s, bank statement to show the funds going out. Will this jeopardize our loan and down payment assistance? Is it possible they can still deny us? We cannot get the mortgage without the down payment assistance.

  102. Anne August 10, 2015 at 5:43 pm -


    My husband’s home was foreclosed in 2012. We would like to apply for an FHA mortgage and try to get approved for around 150,000 to buy a condo or townhouse. Will we need to wait until exactly three years from the time the property was sold at auction (9/4/12) or three years from the date the sale was recorded with the county (9/24/12). We live in Florida.

    Also if I may ask one more question: when the lender looks at our savings account statement they will see that we usually move $100 a month from our savings to checking to cover our expenses. Will that be a huge red flag that will get our application denied altogether, or just that we will get approved for a low amount? Should we try to go two months without touching our savings at all and then apply? Thanks.

  103. karen August 12, 2015 at 9:12 am -

    why can i not purchase land the has 2 houses on it.both house are nice and move in ready and i have renters long term lined and have enough money,but bank is telling me something about having property assesed is to to hard and i would get approved for that confused

  104. Dustin August 13, 2015 at 8:00 am -

    Hi Colin, if needed I plan to take a loan out against my 401k to meet the PITI. Do I need to have the funds withdrawn from my 401k to meet the PITI requirements or can I simply provide a monthly statement and current balance as proof that the funds exist if they are ever needed?

  105. Ruth August 19, 2015 at 10:27 pm -

    Hi Colin, I just turned 60 and am withdrawing all of my 401k. Part of it will be gifted to my daughter to help her purchase a home. Does the money need to be in my checking account for 60 days or can they just verify the 401k was active for that long?

  106. Colin Robertson August 20, 2015 at 9:02 am -


    That 60-day thing is for the borrower’s account, should they want to have seasoned funds and thus not need a gift.

  107. Ruth August 21, 2015 at 8:26 pm -

    Thanks Colin, but she was approved for an FHA loan and was told that my gift had to be seasoned. Was she told the wrong information?

  108. Colin Robertson August 22, 2015 at 9:29 am -

    It sounds like your gift money is also seasoned, coming from a retirement account you’ve held for some time, but she may want to clarify with the lender to make sure she satisfies any specific requirements they may have.

  109. Ruth August 22, 2015 at 1:29 pm -

    Thanks so much for your help Colin! Have a wonderful weekend!

  110. Nicole August 26, 2015 at 10:57 am -

    I am currently finalizing a cash out refinance with my current property, the money I am talking out of my property is for another house I am in the process of purchasing. Can someone help me understand if the dollars I am waiting to receive from the refinance are going to be able to be used as proof of funds on my investment property. The refinance has already received the mortgage commit, as well as the appraisal. Is my current house considered a liquid asset, not only for the dollars I’m taking out, but the equity I will still have after the refinance?

  111. Colin Robertson August 26, 2015 at 3:28 pm -


    A home isn’t considered a liquid asset because it’s not easy to…liquidate, aka sell. But homeowners often tap their home equity to buy another home, just make sure you can qualify for both loans.

  112. David L Richards September 6, 2015 at 8:29 am -


    In connection with the asset reserve requirement for a mortgage application, I provided stock in a publicly traded major utility which can be sold and proceeds received in one week from the request to sell. The value of the stock is well in excess of the two months reserves I need. I have been told this is not sufficient. Does this make sense? What are the standards for liquidity for this purpose?

  113. Colin Robertson September 8, 2015 at 8:59 am -


    Did you ask the lender why it can’t be used as reserves?

  114. soumya thomas September 25, 2015 at 5:01 am -

    hi, Can i use my ira accounts to show reserve?

  115. Colin Robertson September 25, 2015 at 8:30 am -


    IRA accounts are acceptable for reserves, but speak to your lender/loan officer for program specifics to be sure.

  116. Wayne September 25, 2015 at 1:11 pm -

    I’m required to have no less then 1% of the sales price in my account per loan requirements

    “The borrower must have not less than 1% of the sales price verified as their own liquid funds, available to use towards closing
    costs, pre-paid items or have as cash reserves after closing. The remainder of the required funds may be from borrower’ s funds,
    seller paid funds or a gift.”

    My question is after closing do I still have to keep this amount in there?

  117. Colin Robertson September 28, 2015 at 12:11 pm -


    Reserves are just required for the loan to fund, to ensure you have necessary cash to make future payments. Once the loan funds and records and the process is over the money shouldn’t need to be in any given account. Ask your loan officer for specific details.

  118. Melanie September 28, 2015 at 12:43 pm -

    Can retirement funds be our only source of reserves? We want to put 10% down but if we have to show months of reserves, then it will take our 10% down to do that. We have about $90K in our 401k together. Will that suffice?

  119. Colin Robertson September 29, 2015 at 6:25 pm -


    You should ask your lender to be certain but retirement assets are often used for down payment, closing costs, and reserves, though underwriters do generally like to see that you have some money in the bank as well.

  120. Julia September 30, 2015 at 9:23 pm -

    I recently applied for a mortgage and the underwriters have asked me to explain a 6 month gap in my employment history and a large deposit of 10K. To make a long story short, I was working for a start-up company for 6 months and they couldn’t afford to pay me. I was actually eventually employed by one of the founders in a different business that could afford to pay me. When the start-up became profitable they sent me a check for 10K along with a thank you note for helping them get the business running. I spent the 10K on moving expenses (cross country). I didn’t include this as wages on my application, as it wasn’t taxed and was sent to me as a thank-you gift. I am not using it for a down payment, or stating that it is income. I explained where the money came from in an email to the underwriters (as requested), but I am now concerned that it will prevent me from getting my mortgage. In your experience do you forsee this as being a problem?

  121. Colin Robertson October 1, 2015 at 10:40 am -


    Hard to say, but if you state your case and it makes sense to the underwriter (and provide documentation when necessary), it has a chance. It may just take some extra legwork and paperwork…

  122. James February 1, 2016 at 1:20 pm -

    I’m a first-time home-buyer and have $10,000 in an IRA that I’d like to use towards the purchase of my first home, but I’m a little confused as to what expenses are eligible to use those funds and avoid the tax penalty. Fo instance, am I able to use those funds to pay for the initial appraisal and inspection of the property, or do those have to come out-of-pocket?

  123. Michelle February 10, 2016 at 8:09 pm -

    Hi Colin-
    I am at the end of my loan process and the underwriter has surprised me saying that funds in my 401k that could only be withdrawn in a ‘hardship’ case cannot be counted for my reserves. I am short 2500 in reserves and there is a significant magnitude greater in the account. I am fully vested so the money is available to me. Instead the advisor wants me to make a withdrawal from the account (I have the max loans out, but the company match is available up to the max of 50k now —still a penalty, but no hardship required). Is the under writer correct –this is Wells Fargo …if she is not what is a good diplomatic tactic to get her to move to another position in her thinking?

  124. Colin Robertson February 11, 2016 at 3:53 pm -


    You can ask your loan officer to discuss with the UW what you just wrote, that’s it’s not a hardship if that’s in fact the issue with not allowing the funds for reserves, or ask for an alternative to meet the reserve requirement if they won’t budge. Generally the most diplomatic route with underwriters is asking for an alternative to get the job done.

  125. Karen February 20, 2016 at 4:43 pm -

    Hi Colin,

    Me and my husband are looking into buying our first home. We have savings account but not a lot of money in it. I have 11,000 on 401k tho, would that be enough for reserve? we’re looking at a 134,000 USDA loan.

  126. Anne February 22, 2016 at 9:30 am -

    Hi Colin – My husband and I each make about 70k, $140k total. My husband’s job began in late 2015, and prior to he was making about $25k until he completed his masters in mid-2015 and began negotiating for this job. I am concerned about him nearly tripling his income – will they question this? Job is in the exact field for his masters. We have about $50k for down payment from previous home sale, $23k in reserves (401k), and $10k in additional savings for closing costs. We are looking for houses around $400k but haven’t even tried to get pre-approved yet because I am concerned that due to his short time of employment they will say we don’t have enough cash on hand. Will most lenders require he be there for two years with our limited assets?

  127. Colin Robertson February 22, 2016 at 7:10 pm -


    Best to speak with a loan officer experienced with USDA to see what is specifically needed for your particular loan amount and loan scenario.

  128. Colin Robertson February 22, 2016 at 7:25 pm -


    It might actually make sense to speak with some lenders now, as opposed to waiting until the 11th hour, to see what potential issues you may have once it comes time to apply for a loan. If his new job is in the same field as his degree a lender may not have a problem with his limited job history because it makes sense. Cash on hand seems to be a lot better than many other Americans…

  129. Heather March 14, 2016 at 12:30 pm -

    Hi Colin. My husband filed bankruptcy 5 years ago before we were married. Although he kept his house , he has been paying the mortgage late. If we sell the house, will we still have to provide his payment history to qualify for a loan. We want purchase another house less than six months after we sell the current house.

  130. Colin Robertson March 16, 2016 at 10:08 am -


    The lender will likely see the payment history on his credit report though if enough time has passed it may not be an issue.

  131. Jane March 29, 2016 at 8:55 am -

    Hi Colin. My husband is being transferred from West Coast to East Coast end of May and was pre-approved for a mortage by the loan company he works for (he works marketing and is not involved in the mortgage aspect of the company). We found a house and put in an offer. We did everything that we were asked to do and today the mortgage company said our funds were not acceptable because they were not seasoned and they wouldn’t take part of it because it was a gift (with a gift letter). We will loose the funds that we have given as a good faith holding and are about to loose the option to purchase the house. My husband does not have very good credit, but good employment and rental history. This loan was to be an FHA loan through Fannie Mae. Are there any other options out there that we could utilize that would allow us to purchase this home still? They never advised us of seasoned funds, only gave us an amount to have in the account for us to proceed. We had most of the deposit for over two months as cash on hand because we were saving it up towards our cross country move. If we had known, we could have deposited the money earlier. We move end of May and if we have to rent a place, it would cost most of our savings because of first and last month plus security.

  132. Colin Robertson April 4, 2016 at 6:58 pm -


    Not sure if you’re working with just a single bank/lender, but it might be advisable to inquire with a broker who can guide you through the process and determine the best financing option(s) for your situation. Good luck!

  133. Tim April 7, 2016 at 2:44 pm -

    I need to plan what I can do. I would like to see if there is an option for me not to be working when I get a loan for a new house. When I sell my current house, I will have enough for the down payment. I have a nice 401k that I want to use as income. I want to pull it out slowly to make the monthly payments. This is so I would fall into a lower tax bracket. Can this be done? How do I do about getting the loan?

  134. Michelle Moretz April 8, 2016 at 6:07 pm -

    Dear Colin,

    My husband and I want to buy a house by August of this year however, we each have some weaknesses regarding our situations. We do not know if I should apply, he should apply or if we should apply together for a home. My situation: currently unemployed, full time student working on masters degree and taking care of our 5 month old. $10K in savings. $43K in stock established and maintained with major growth since 1992. Credit mid 600’s. Around 35K in student debt loans.
    Husbands situation: no savings or checking really except a buffer of $1,000 due to me controlling the finances, he is amazing at spending all of our money. He is employed full time but with a new employer, started 12/15. His credit is high 500s.He is retired army so could do VA.
    If you were in my position what situation has less risk? Or do we not stand a chance at all? Also…do I have to liquidate all of my stock for it to be considered assets? And…if 6 months of steady employment history is not strong enough for my husband, do you believe 9 months would suffice? Our rental renewal starts 09/16, trying to buy before then. Thank you in advance for any advice you send my way! Best Regards, Michelle Leigh Moretz

  135. Colin Robertson April 18, 2016 at 11:36 am -


    It sounds like you both aren’t great borrowers (at least in terms of straight up numbers, sadly), and you may have difficultly qualifying for a mortgage either with just one or both of you. Might be good to sit down with some mortgage brokers so they can assess your situation and determine what type of financing you’re eligible for if any. In the meantime do your best to improve your credit scores and squirrel away money to buffer your asset reserves. Also keep spending to a minimum if possible, which should boost your scores and increase assets if you rely on credit cards a lot. Shouldn’t have to actually sell your stock to use it…it just has to be available to you. The job thing is tough because you can’t just add employment history, but there may still be options. And if everything else in your borrower profile looks better (credit score, assets) it should help.

  136. Colin Robertson April 18, 2016 at 12:04 pm -


    There’s an option to use asset depletion to qualify for a conventional mortgage if you don’t have an income…look into it.

  137. Stacey May 1, 2016 at 6:05 pm -

    Colin, I have no debt, hence no credit score. My husband has no debt but still has a credit score of 746. We are building a new $328,000 home and have been pre-approval. I make $86,000 a year & husband $77,610. We have 20% down plus $7,000 closing costs in our joint checking but this will deplete our savings & MM. Husband has $203,000 in 401K, I have $89,000. Mortgage lender wants to only use my husband on the loan but I will be on the title. Can his 401K be used as assets without without actually withdrawing and depositing into our joint account? Also, I have a separate checking account for my personal spending money. Since I will not be on the loan, can I take a loan from my 401K to deposit into my checking account to use for expenses such as to pay the insurance in full on the new home for the full year? We are not escrowing the taxes or insurance. Or, would that jeapordize the loan since I will still be on the title and signing the paperwork during closing? Unfortunately I am not very confident in our mortgage brokers advice with the new 2016 laws in play. Thank you.

  138. Colin Robertson May 2, 2016 at 9:37 am -


    Ideally you won’t have to actually move any money out for your 401ks, instead just use it as proof of reserves. Your broker should know best how to structure the loan knowing who has what assets available. Not sure why you would want to mess with your retirement to pay your insurance bill. Maybe there’s a better way to get cash, such as a lender credit to pay for some/all of the closing costs in exchange for a slightly higher mortgage rate.

  139. Mae Francis May 18, 2016 at 2:22 pm -

    Hi Collin,

    My husband borrowed from his 401k to use as a down payment for a home purchase which we received and deposited into his checking account. The purchase fell through because of a problem with that specific house and we had to cancelled the purchase contract. We will now be looking for another property to purchase. Do we need to let his 401 company know what happened, or just move forward with looking for something else to buy, since they previously requested copies of the purchase contract of that first home that we ended up not buying. Also, what if we need to now borrow more money from the 401k? Will they then ask about what happened to the first purchase? We just want to do what’s right.

  140. Colin Robertson May 23, 2016 at 8:49 am -


    If they needed a purchase contract for that specific address, they’ll likely need one for the new property. There may also be a time limit to apply the funds to a home purchase, which you may want to discuss with the 401k company to ensure you complete everything in time.

  141. Lisa May 31, 2016 at 11:25 am -

    Hi, I’m buying my first home and will be using a rollover IRA to cover my closing costs. Funds are from my previous employer’s 401k and have been in the IRA account about a year and half. My question is should I move the funds to my personal checking/savings account now or transfer the finds right before the closing date in mid-July? I’m still confirming a lender and may check one or two more to compare rates/fees.

  142. Colin Robertson June 1, 2016 at 8:21 am -


    Probably best to ask your lender when you should move the money to ensure it runs smoothly.

  143. B.. June 7, 2016 at 5:52 pm -

    Hi Colin,
    I’m in the middle of the mortgage process with one of the nations largest lenders and am trying to purchase my dream home (for a wonderful price and as a new primary residence) before selling my current home. (Trying to capture this house before it’s gone and have plan to do minor renovations aka have wallpaper removed, rooms repainted, install carpets in order to put current house on market for late summer/fall – and I can carry both properties for up to a year if I had to without damaging myself financially)

    This is a jumbo/non-conforming loan program with 10.1% down and no PMI. Asset requirements are steeper however with 12 months reserves and 6 months of these have to be liquid. I planned to take a 401k loan to help subsidize closing costs and meet the liquid asset requirements at closing and at the outset I asked the originator specifically if the 401k loan would be counted toward DTI and was told no. Here I am over $1,200 deep in inspections and the loan processor u was handed off to informs me that the 401k loan is indeed going to count towards DTI and that puts me in the 37% range and the hard cutoff is 35%. I think I feel the dream home slipping away. I understand this isn’t a normal conforming loan, but this feels rather bait-and-switch… I’d appreciate any background info on how this might happen and also any advice you may have. Thank you.

  144. Colin Robertson June 9, 2016 at 9:57 am -


    If it is indeed counted and the DTI is exceeded, you could ask for an exception or play around with the numbers (down payment, etc.) to get the DTI back into range.

  145. John June 21, 2016 at 7:00 pm -

    Hello Colin

    I’m planing to purchase a second apartment , I own a business I have 100K in my business account I like to use that for the down payment which is around 55k I don’t have enough money in my personal account for the down payment I only take out what I need to pay my living expenses, so I need to make a payment to my personal account for the down payment before the purchase is that correct if I wanna use the money from the business, but that money I take out I will need to pay income tax correct? Same as I pay on my monthly salary. Thank you for your advice!!

  146. Colin Robertson June 24, 2016 at 4:18 pm -


    Can’t comment on the tax implications, but you should make sure the business assets can be used for the mortgage. Might have to prove that either you have full access to the funds and that their removal won’t affect the business negatively.

  147. Maureen August 2, 2016 at 4:01 pm -

    Hi. I’m planning to retire in 2.5 years, sell my current home owned outright and purchase a home in another state. I expect to need some amount of mortgage in addition to the approx. 100k from the sale of current home. Will I be able to get a mortgage based on social security, personal annuity, and IRA distributions? Will they accept those as income at that point? I’ve been advised they won’t and I’ll need to get mortgage and buy home prior to leaving ft work. Thanks so much!! M

  148. Colin Robertson August 4, 2016 at 11:21 am -


    It might be possible to use assets to qualify for a mortgage (assuming they are plentiful/sufficient), but it might be easier to secure all mortgages before retirement.

  149. James August 24, 2016 at 6:45 pm -


    We are in the process of starting the final loan approval as we are 2 1/2 months out from closing (new construction). We have a FHA loan with 3.5 down and has already placed the down payment and earnest money into escrow. We have the income to cover the new mortgage payment; however, during the time of construction we were planning to save the remaining cash to close amount. We are exactly 3 weeks from obtaining the cash (5K). Since we are 2 months out from closing date, think it is possible the lender wants to see the reserve money now or will wait until it is all there.

  150. Colin Robertson August 25, 2016 at 4:52 pm -


    If you want the definitive answer you should probably ask the lender directly. The source of that cash may also be scrutinized.

  151. Joleen September 10, 2016 at 5:18 am -

    About 2 years ago My Fiance of 6 years, (now my EX-FIANCE) and his Loan Officer conned me into lending his Parents the money for his down-payment, as a “GIFT” from them ($10k). This money was VERBALLY AGREED UPON, by my Fiance and his Parents, that the monies I lent them, was a LOAN and NOT a GIFT. We weren’t to be married until a year after Settlement, and I would not have any Equity nor be on the title to the house until we were married. I asked about just adding me to the title at Settlement and I was told by the Loan Officer that it was not a good idea to do so. I was extremely wary of this whole transaction, and about 3 days before Settlement (by MUCH prodding from my Fiance and his Loan Officer), I FINALLY told my Bank to wire the money to my Fiance’s parents. Approx. 24 hours before my Fiance’s Settlement, I was then told by my Fiance that he nor his Parents could pay me back. I flipped. Then he tells me that the Loan Officer told him that he could put me on the title to the house, within 3-6 months after the Loan closed so I wouldn’t be so worried. I was upset, but I couldn’t dispute the Wire Transfer with my Bank, in time….to have them reverse it, and to STOP Settlement. I bit the bullet, held my breathe and KNEW I made a horrible mistake. These people committed Mortgage Fraud, and conned me out of my money, to help my Fiance get a Mortgage with MY MONEY. The Loan Officer even went so far, as to CHANGE the RECEIPT on the Home Inspection that I paid for, to make it look like my Fiance PAID for it. Subsequently, after a year…..I FINALLY got tired of fighting with my Fiance about putting me on the title to the House, or paying me back the money (like he said he would do). I have since, broken up with him….over this, which is to be expected. We live in Pennsylvania, and an ORAL/VERBAL AGREEMENT has a Statute of Limitations of 4 years. It has only been 2 years since he defrauded me, so I have the ability to seek Counsel. I was told that I have every right to contact the Bank, and tell them what my EX-FIANCE and his Loan Officer did to obtain the Mortgage. I will also be filing a Civil Law Suit. Any ideas as to the ramifications to my EX and the Loan Officer and possibly the Bank, for perpetrating this Fraud…? And, Yes, I have ALL the documentation to confirm what they did, and much much more.

  152. Colin Robertson September 12, 2016 at 5:18 pm -


    Not sure what will happen to them, sorry to hear that happened to you.

  153. Moe October 1, 2016 at 3:32 am -


    I was originally asked to have one month’s rent in reserve for my mortgage. But now I am asked to have 3 months. I have an ESOP profit sharing account with my employer which I cannot withdraw funds from until I either leave the company or retire. Would I be able to use the amount in the ESOP profit sharing account for my reserve requirementS?

  154. Colin Robertson October 3, 2016 at 1:48 pm -


    You’ll have to run it by your loan officer and/or underwriter to be sure…

  155. patrick October 19, 2016 at 2:38 am -

    why does my mortgage company need information about my pension. I do not have a pension loan out or am I using any money from my pension towards my potential house

  156. Colin Robertson October 19, 2016 at 8:07 am -


    They might be asking for all your asset documentation and assuming you have a pension/401k/etc. If you don’t have one there won’t be any related documentation.

  157. Ruth December 12, 2016 at 3:57 pm -

    Hi Colin,
    Do you think there is any possibility of me qualify for a home loan?
    I would like to purchase a $90,000 condo/coop. I work par-time making $16,000/yr. I have 25 thousand in savings. I have no debt or credit cards, but my credit score is below 600.

    If I were elegible, how long do you think it would take me to move into a new home if I started the process today?

    Thanks for being so attentive and helpful to all your web page visitors.

  158. Hannah December 12, 2016 at 6:23 pm -

    Why is it that I can have over $150,000 and fair credit but cannot secure a mortgage? I received a personal injury settlement that is handled by a financial advisor and he sends me the amount I need to live on monthly and I can call and let him know when it’s time to pay tuition or if I had to go the emergency room, etc. This past summer I was told it was credit problems. I fixed the credit problems and now I am being told that my monthly disbursement isn’t income and that unless I put half of my money into an annuity I don’t meet the FHA requirements, and that I cannot qualify for a USDA loan because of the fact I have so much money. I am so tired of renting and throwing away my money but it is also a very stupid financial decision to pay for a house in cash when I make a decent return on my financial portfolio. Please, tell me how I can purchase a home. I even have the house I want to buy and have discussed it with the owners. I just need a mortgage.

  159. Colin Robertson December 13, 2016 at 10:34 am -

    Hi Ruth,

    You’d probably want to get your credit score up a lot higher first to ensure you get the lowest rate and qualify for conforming programs that require 620 minimum scores. The part-time work would need to be ongoing with history so the lender knows you’ll continue to receive it. And you’ll need to clear enough to keep your DTI at/below the maximum once your total housing payment is factored in. May want to speak with lenders/brokers to run a quick pre-qual to see if it’s a possibility, within reach, or nowhere close.

  160. Colin Robertson December 13, 2016 at 10:38 am -


    It sounds like you have sufficient assets, but an income shortfall? Might be able to qualify using assets where they take the total and divide over 360 months (mortgage term). Both Fannie and Freddie offer something like this, but you’ll probably want to work on your credit as well to be a strong candidate.

  161. Matt Malec February 10, 2017 at 1:01 pm -

    Hi Colin,

    If someone is putting 20% down on their primary residence on a conventional loan, how much of it must be their own funds and how much can be a gift?

  162. Colin Robertson February 15, 2017 at 3:25 pm -


    In many cases it can all be in the form of a gift if 80% LTV (20% down) and a one-unit owner-occupied property.

  163. Kelly March 4, 2017 at 3:18 pm -

    Hi, we are in the process of purchasing a house and are planning to use a 401K loan for the down payment (FHA loan). We are planning to take out the maximum amount allowed and should have some money left from the 401K that we would like to use for the appraisal. My question is – if using a 401K loan, does it matter when we transfer the funds into our checking account? I’ve read about funds being seasoned, but so far all the money is still sitting in the 401K. Can we transfer at any time as long as we provide proof that the funds came from the 401K? Or do we have to wait until closer to closing to transfer funds into checking?

  164. Colin Robertson March 5, 2017 at 10:52 am -


    The 401k loan should be considered seasoned regardless of when it’s transferred to your checking, but the lender will need to see the paper trail to ensure those funds actually arrived via the 401k loan and not an unacceptable source. It doesn’t hurt to run this process by your lender to avoid any hiccups.

  165. Aaron March 22, 2017 at 5:15 pm -


    I am interested in purchasing a single family home as an investment property. I currently do not have the 20% for the down payment buy I have excellent credit and I am interested in using a personal loan for the down payment. I understand that you cannot use borrowed money for a down payment on an investment property, but I was wondering what if you took out the loan for a “vacation” or something else, let it sit for 6-12 months or so, and use it for the 20% down payment. I understand this will affect my debt to income ratio, but as long as the numbers work will I be okay? From my understanding the underwriter only wants 2-3 months of bank statements and the balance prior to that isn’t in question. Or does the mortgage underwriter go back and see that some of my down payment may have come from that personal loan? Any advice would be greatly appreciated, thank you.

  166. Lou March 27, 2017 at 8:02 am -

    Colin, when doing a cash out refinance, do you need to have enough PTI for all existing properties or just for the one you are refinancing?

  167. Colin Robertson March 27, 2017 at 9:02 am -


    If you have other financed properties, you will likely need to have X months of reserves for each or they may require a percentage (2-6%) of the aggregate unpaid principal balance of those properties.

  168. Lou March 27, 2017 at 12:40 pm -

    Colin, given that the reserves are in question, is FHA a better way to go? I know there are upfront costs plus M&I.

  169. Colin Robertson March 27, 2017 at 12:52 pm -


    You may want to determine what types of loans you can qualify for and see if reserves are going to be an issue for sure, then compare costs…FHA forces mortgage insurance on its borrowers, whereas you might not need it with conventional financing.

  170. Brad June 25, 2017 at 8:28 am -

    My wife and I are looking to build a house on two acres we own. We have recently paid completely out of debt(vehicles and credit cards), and have 50k or so in a 401k and 10k in other dividend reinvesting stocks. We are starting to funnel cash into checking account now that debt is paid off. We are both under 30 years old and both have 800 credit scores, yet we are nervous about going to the bank to start the process of getting a mortgage to build a house. Should we be? Would our land or 401k/ stock accounts offset our lower cash in accounts?

  171. Colin Robertson June 25, 2017 at 10:30 am -


    You may want to look into construction financing and/or construction-to-perm financing to determine how much cash you’ll actually need for down payment and reserves. You won’t be nervous if you prepare and know exactly what you’ll need to get approved ahead of time.

  172. Timeka June 28, 2017 at 8:23 pm -

    Hi Colin im in the process of closing in a few days and my lender requested 2 months of reserves which is in my bank and the underwriters approved my loan how long do my money have to sit in the bank before i can use it

  173. Colin Robertson June 29, 2017 at 9:01 am -


    You generally don’t want to touch that reserve money until the loan funds to avoid any extra conditions or scrutiny.

  174. Ziegan4 July 19, 2017 at 11:02 pm -

    I have a conditional approval for an FHA mortgage loan. I deposited cash in my account that the underwriters are requesting a paper trail for. This money was from repayment of a personal loan that I gave to my boyfriend in 2014. Any advice on how to handle this situation? Thanks in advance!

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