Reserves (Mortgage Underwriting)

Updated 2026-05-17

In mortgage underwriting, "reserves" refer to the amount of liquid assets a borrower has remaining after the down payment and closing costs have been paid. These assets serve as a financial buffer, demonstrating the borrower's ability to continue making mortgage payments in the event of unforeseen financial difficulties, such as job loss or medical emergencies.

Fannie Mae Guidelines

Fannie Mae's underwriting guidelines typically require borrowers to have a certain number of months of housing payments (Principal, Interest, Taxes, and Insurance - PITI) in reserves. The specific requirement can vary based on factors such as the loan-to-value (LTV) ratio, VA-Approved Credit Underwriter and Underwriting Standards, and the presence of VA-Approved Credit Underwriter and Underwriting Standards. Common reserve requirements range from 2 to 6 months of PITI.

Key Aspects of Reserves

• Liquidity: Reserves must be held in liquid accounts, such as checking, savings, or certain investment accounts, that can be readily accessed.
• Verification: Lenders verify reserves through bank statements, investment account statements, or other financial documentation as part of the VA-Approved Credit Underwriter and Underwriting Standards process.
• Compensating Factor: Significant reserves can act as a VA-Approved Credit Underwriter and Underwriting Standards, potentially allowing for approval of loans with slightly higher VA-Approved Credit Underwriter and Underwriting Standardss or other minor weaknesses.