topic Re: FHA Cash reserves in Mortgage Loans

FHA Cash reserves

Nathan326 — Mon, 19 Mar 2012 02:07:56 GMT

Are lenders requiring cash reserves for FHA loans? We are going through Sovereign Bank and I don't have a good understanding of any overlays they use in addition to FHA minimums. If yes, what factors contribute to need for a cash reserve?

Re: FHA Cash reserves

seemund — Mon, 19 Mar 2012 12:27:46 GMT

What type of property? Single family?

I know on multi-family properties (3-4), you're required to have at least 3 months of PITI reserves.

Re: FHA Cash reserves

Student_Loans_Kill — Mon, 19 Mar 2012 12:31:41 GMT

USAA told me this can be in the form of a CD, is this correct?

Re: FHA Cash reserves

StrateUp — Mon, 19 Mar 2012 12:48:49 GMT

My 401K is acceptable.

Re: FHA Cash reserves

MBOhio2 — Mon, 19 Mar 2012 16:40:32 GMT

FHA does not require reserves, but I think it's very common (depending on the other factors of your credit profile) for lenders to require reserves with FHA loans.

Re: FHA Cash reserves

creditisbetter2 — Tue, 20 Mar 2012 01:51:09 GMT

Nathan326 wrote:
Are lenders requiring cash reserves for FHA loans? We are going through Sovereign Bank and I don't have a good understanding of any overlays they use in addition to FHA minimums. If yes, what factors contribute to need for a cash reserve?

My lender asked about our reserves and wanted to see bank statements verifying the funds were still there and that we hadn't spent any. Part of our reserves was cash in a savings account and part of it was in a 401k. I believe the cash needs to be at least the 3.5% FHA downpayment amount of the loan. So say you are buying a home for 200k, you need to have at least 7k in an account somewhere and this account needs to hold these funds for at least 3 months. If you touch the money, whether it be adding to it or taking from it, that will mess up your underwriting completely and could potentially prevent you from getting the home in the time frame you would like to. Every lender is different though, some may not be as strict as others. Ask around and go with the one who provides the best and most flexible option for your situation.

Re: FHA Cash reserves

Nathan326 — Tue, 20 Mar 2012 02:01:25 GMT

Was there something unique about your situation or was that the norm for your lender?

Re: FHA Cash reserves

creditisbetter2 — Tue, 20 Mar 2012 02:39:32 GMT

Nathan326 wrote:
Was there something unique about your situation or was that the norm for your lender?

That was the norm for this particular lender. We were going to go with another lender because they were easier with their requirements but they were unable to get the builder incentives to transfer over. That's why we stuck with the builders lender.

Re: FHA Cash reserves

Walt_K — Tue, 20 Mar 2012 20:38:28 GMT

creditisbetter2 wrote:
Nathan326 wrote:
Are lenders requiring cash reserves for FHA loans? We are going through Sovereign Bank and I don't have a good understanding of any overlays they use in addition to FHA minimums. If yes, what factors contribute to need for a cash reserve?
My lender asked about our reserves and wanted to see bank statements verifying the funds were still there and that we hadn't spent any. Part of our reserves was cash in a savings account and part of it was in a 401k. I believe the cash needs to be at least the 3.5% FHA downpayment amount of the loan. So say you are buying a home for 200k, you need to have at least 7k in an account somewhere and this account needs to hold these funds for at least 3 months. If you touch the money, whether it be adding to it or taking from it, that will mess up your underwriting completely and could potentially prevent you from getting the home in the time frame you would like to. Every lender is different though, some may not be as strict as others. Ask around and go with the one who provides the best and most flexible option for your situation.

Why would adding to your savings account cause a problem? I've been regularly adding to my account throughout my loan process and it has not caused any issues with UW. Maybe I shouldn't speak too soon as we don't close until April 26th, but I can't see how adding to your account would be an issue unless there was a problem with sourcing the funds. Even then, if it is in excess of what you need, can't they run the numbers ignoring the non-sourced funds?

Re: FHA Cash reserves

Nathan326 — Tue, 20 Mar 2012 20:41:26 GMT

Walt_K wrote:
creditisbetter2 wrote:
Nathan326 wrote:
Are lenders requiring cash reserves for FHA loans? We are going through Sovereign Bank and I don't have a good understanding of any overlays they use in addition to FHA minimums. If yes, what factors contribute to need for a cash reserve?
My lender asked about our reserves and wanted to see bank statements verifying the funds were still there and that we hadn't spent any. Part of our reserves was cash in a savings account and part of it was in a 401k. I believe the cash needs to be at least the 3.5% FHA downpayment amount of the loan. So say you are buying a home for 200k, you need to have at least 7k in an account somewhere and this account needs to hold these funds for at least 3 months. If you touch the money, whether it be adding to it or taking from it, that will mess up your underwriting completely and could potentially prevent you from getting the home in the time frame you would like to. Every lender is different though, some may not be as strict as others. Ask around and go with the one who provides the best and most flexible option for your situation.
Why would adding to your savings account cause a problem? I've been regularly adding to my account throughout my loan process and it has not caused any issues with UW. Maybe I shouldn't speak too soon as we don't close until April 26th, but I can't see how adding to your account would be an issue unless there was a problem with sourcing the funds. Even then, if it is in excess of what you need, can't they run the numbers ignoring the non-sourced funds?

I hope adding to our savings account isn't a problem. My wife and I are transferring money from our paychecks each week to continue to build the account as we approach closing. The funds can easily be traced back to our paychecks. It's almost as if damned if you do and damned if you don't.

Re: FHA Cash reserves

ripper998 — Tue, 20 Mar 2012 22:29:15 GMT

I think that varys per lender though. The only thing I had show in my account was the closing money needed and a copy of the 401K check we got.

Re: FHA Cash reserves

MBOhio2 — Wed, 21 Mar 2012 13:25:05 GMT

I could be wrong, so I am open to an expert jumping in to correct me, but here are my thoughts...

Adding to your savings does not itself cause a problem because with mortgage lending, the more money you have in savings/reserves, the better :) However, what your LO may be saying is that if you keep adding reserves that you want to count in your favor and the lender has to keep going back and re-verifying the reserves, then that could slow down the process. For example, if you started the application process with $5K in savings and then before closing, you say "but wait, I have $10K now".... the money is great, but they have to verify it, which could take a little time. Unless your reserves are tight and you need to count every last penny, this is a moot point, but if you do want to count every last penny up to the 11th hours, then it could cause some delays.