Reserves Needed at Closing

[Anonymous]

Hello,

I am pulling a mortgage here in a couple weeks.

My middle Score is 680.

DTI is 24/37

I can go either FHA 3.5% down or Conventional 5% down.

I have the 5% down, and seller is paying closing costs so I can go Conventional. However it will leave me with barely any reserves in the bank.

I really want to go Conventional because after my other house sells, i will have the $ for 20% down and will be able to lose the PMI in the next year.

My lender is out of her office until Tuesday, so I was just wondering on what is needed for reserves when going conventional.

Also what is typical closing time on a Conventional and FHA Mortgage?

Thanks!

BDR

[Anonymous]

Also, would a 457b plan count and I also own a house free and clear worth arround $100,000 that is forsale but not sold yet. Does that count for anything?

[Anonymous]

If the house hasn't sold yet, it won't count for anything but property tax against your DTI. I would go Conventional if I were you. The ability to get out of PMI so quickly trumps the FHA MIP for the life of the loan and you wouldn't have to worry about refinancing down the road. Reserves needed depend on the lender. I've seen posts where LO's here have said they've closed with basically nothing in reserves. It's always nice to have, but I don't think it'll be a deal breaker.

[StartingOver10]

Typical closing time varies by lender and their process.  I had a FHA sale close in 25 days last month even with the new TRID rules. However, if you go with a big box bank they move very, very slowly (think "lumbering elephant" here).  Big box banks need ~45 days more or less. 

Usually conventional loans close slighly more quickly but if you go with a mortgage banker you should be able to close in 30 days.  ASK the LOAN OFFICER.  He should be able to tell you how long s/he needs to close your file. 

[Anonymous]

 Fannie won't require assets, but your lender may. Retirement accounts typically count as reserves as long as they are liquidable. 

[Anonymous]

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@Anonymous wrote:

Hello,

I am pulling a mortgage here in a couple weeks.

My middle Score is 680.

DTI is 24/37

I can go either FHA 3.5% down or Conventional 5% down.

I have the 5% down, and seller is paying closing costs so I can go Conventional. However it will leave me with barely any reserves in the bank.

I really want to go Conventional because after my other house sells, i will have the $ for 20% down and will be able to lose the PMI in the next year.

My lender is out of her office until Tuesday, so I was just wondering on what is needed for reserves when going conventional.

Also what is typical closing time on a Conventional and FHA Mortgage?

Thanks!

BDR

---

Go conventional if you can. Our closing time on our conventional loan was 27 days from the date the contract was signed until the date that we recorded with our county. If you have all of your ducks in a row, are responsive to your loan officer, and have a good, clean credit profile, closing should be relatively quick. Also, some lenders may not require you to show reserves. 

As a side note: You mentioned that if you went with a Conventional 5% that you would have very little reserves. I caution anyone going through the home-buying process to make sure that you have a comfortable cash-in-the-bank buffer on hand for all of the incidentals. I can tell you that within one month of owning our home, we have had repairs totaling $5,000. This does not include furniture, appliances, etc. If you have time, I would seriously consider waiting until your house that is for sale closes and just putting the 20% down and having some extra change in your pocket.