Still unclear on reserves

[JMMD]

I believe for FHA they require 2 months reserves. Is that actual cash needed at closing or can we submit 401K papers showing we have that much avaalble if needed? I am trying to figure out a ball park figure of what we'd need in cash at closing.

[frugalQ]

401k available funds are considered reserves.

[JMMD]

---

@frugalQ wrote:
401k available funds are considered reserves.

---

Thank you! I am getting encouraged that we might actually apply this year instead of next.

[Movin_on_up]

---

@frugalQ wrote:
401k available funds are considered reserves.

---

I was told by a local mortgage broker last weekend that they would count up to 70% of my 401K in the reserve calculation.   Just tossing that out there.

[frugalQ]

You are correct. When I say available, I mean what can be pulled out of 401k. Usually, you can only withdraw a certain %age.

[JMMD]

---

@frugalQ wrote:
You are correct. When I say available, I mean what can be pulled out of 401k. Usually, you can only withdraw a certain %age.

---

Thanks again. We should still be fine as we have plenty in the 401K for this.

[Creditobsessed12]

What exactly is the reserves needed for? Can someone explain?

[frugalQ]

Reserves are basically the amount liquid assets you have on hand to pay mortgage in case of financial hardship.

[Peter1142]

FHA does not require reserves unless the loan is being manually underwritten (which is typically due to very low scores or major derogatories in the file), unless something has changed recently. It is typically only 1 month required. The amount allowed from 401k is 60%. See http://portal.hud.gov/hudportal/documents/huddoc?id=14-02ml.pdf

[JMMD]

---

@Peter1142 wrote:

FHA does not require reserves unless the loan is being manually underwritten (which is typically due to very low scores or major derogatories in the file), unless something has changed recently. It is typically only 1 month required. The amount allowed from 401k is 60%. See http://portal.hud.gov/hudportal/documents/huddoc?id=14-02ml.pdf

---

Thanks again. I Checked our 401K documents and we can take money our for harship such as foreclosure. We have enough to cover any taxes on the W/D ( if needed) so we should be fine as far as reserves.