Fannie Mae & Freddie Mac require different amounts of reserves depending on the different types of financing a borrower is applying for. Here are a few of the requirements for different scenarios.
1st Purchase
If a borrower is buying a home and does not own any other real estate there is normally not a requirement or a rule for a certain amount of reserves. The buyer with good credit can get away with not having any reserves. However the automated underwriting approval (du or lp) might require reserves. Your loan officer will let you know if needed.
- Reserves are normally not required with good credit
2nd Purchase (Purchasing new home and renting current home)
Here are the requirements when buying a 2nd home and renting out previous home:
- 6 Months reserves for home moving out of
- 6 Months reserves for new home
401k's and most retirement accounts can be used for reserves. If we are using the retirement accounts for reserves the underwriter can use up to 60% of the account for the reserve requirement.
Investment or Rental Purchase
- 6 months reserves for new investment property
- 6 months reserves for each additional investment property owned
- 6 months reserves for current primary residence
401k's and most retirement accounts can be used for reserves. If we are using the retirement accounts for reserves the underwriter can use up to 60% of the account for the reserve requirement.
