Reserves are not the down payment
Down payment and closing costs are used in the transaction. Reserves generally remain available after closing and are measured against a defined housing expense.
The lender verifies acceptable assets and applies the selected program’s calculation.
Multiple properties can increase the requirement
Agency guidance can require additional reserves when a borrower has multiple financed properties and the subject is a second home or investment property.
DSCR and other non-agency programs establish their own reserve methods.
Not every asset is treated identically
Checking, savings, investment and retirement assets may receive different treatment. Business funds, borrowed funds and assets needed for closing can require additional analysis or may be limited.
Do not move or liquidate assets before receiving documentation instructions.
Build reserves into the offer
Estimate the down payment, closing costs, repairs and required post-closing liquidity before finalizing the price range.
A reserve requirement is an underwriting standard, not a recommendation for how much emergency savings an investor personally needs.