Assets, reserves and why the same dollar can't do both jobs
Why do they want money left over after closing?
2 minute read
Lenders look at two different things: the cash you need to complete the transaction, and the money left afterward. Reserves are the second one.
Down payment and closing money cannot also count as reserves. For mortgages, reserves are often measured in months of the qualifying housing payment.
They also care where the money came from. Large recent deposits usually need to be sourced, and gift funds have their own documentation rules.
Why this matters
Deals fall apart at the last minute over reserves more often than over the down payment.
What to do with this
- Season your funds: get money into the account you will use well before you apply.
- Plan the down payment and the leftover cushion as two separate numbers from the start.
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