This post explains how lenders calculate post-closing reserve requirements under conventional (conforming) guidelines, and how FHA, VA, jumbo, and Non-QM programs differ. Reserve rules vary by lender overlay, so figures here reflect agency minimums — always confirm current requirements with your loan officer before making financial plans.
What “reserves” actually means
When underwriters talk about reserves, they’re not talking about your down payment or closing costs — those are separate. Reserves are the liquid assets you’d have left after your loan closes: money in the bank that could cover your mortgage payment if your income disappeared tomorrow. [Read more…]
As a mortgage professional, I get to review detailed financials when someone is looking to buy or refinance a home via their loan application. Sometimes people are using every cent they can or are maxing out their monthly cash flow in order to have a home. I often have people who come to me because they need help restructuring their high-interest credit card debts. And I also help people who are well established. Personally, I would like to see more people on a path to financial security.
On my recent post, Comparing 15 and 20 Year Fixed Rates, a reader asks how do I decide which program is best for my clients? The short answer is: I don’t. The decision of what type of mortgage to select is up to my client (assuming they qualify for the shorter term mortgage with the higher payment, of course). I feel it is my duty to help my clients understand the mortgage programs, so they can make an educated decision and to provide them with various scenarios to consider. 
