How Much Do You Need?
Factors like your credit score, loan type, debt-to-income-ratio and loan-to-value ratio will determine the exact amount of cash reserves you may need. Generally speaking, however, lenders ask for at least a few months of housing payments in liquid assets. If you have a lower credit score, you may be asked to provide more reserves than someone with good or excellent credit. Here’s a look at how much you might need based on loan type:
- Conventional Loans: Loans backed by Fannie Mae and Freddie Mac typically require reserves ranging from zero to six months, depending on your particular situation.
- VA and USDA Loans: As long as you’re buying a single-family home to occupy, you won’t need any cash reserves with a VA or USDA loan.
In addition, if you’re an investor who is building your portfolio, lenders may require cash reserves based on a percentage of the loan balances tied to the number of rental properties you own, instead of a set number of monthly payments.