topic Re: Reserves for mortgage - what can be considered reserves? in Mortgage Loans

Reserves for mortgage - what can be considered reserves?

4sallypat — Sat, 17 Apr 2021 19:58:18 GMT

So I got a pre-approved mortgage loan based on a HP, bank statements, W2s, and they did a desktop UW (before full UW).

While offer is very good (2.875% rate, 3.5% down, 30 yr conventional, $6K back at closing) the LO is asking for reserves - they want to know how much of my 403b and how much of my wife's 401k would qualify for a reserve.

Are there other reserves that can be used ?

I have a side hustle business account that I have not disclosed (money varies month to month) and I do have a full vested pension plan for my retirement (CALPERS)....

Re: Reserves for mortgage - what can be considered reserves?

BMW_328i — Sun, 18 Apr 2021 00:20:33 GMT

It's my understanding that you don't have to liquidate your positions. They're interested in the vested amount.

Re: Reserves for mortgage - what can be considered reserves?

jmw1 — Sun, 18 Apr 2021 02:46:12 GMT

@4sallypat wrote:
While offer is very good (2.875% rate, 3.5% down, 30 yr conventional, $6K back at closing) the LO is asking for reserves - they want to know how much of my 403b and how much of my wife's 401k would qualify for a reserve.

Are there other reserves that can be used ?

I have a side hustle business account that I have not disclosed (money varies month to month) and I do have a full vested pension plan for my retirement (CALPERS)....

The problem with 401k and 403b is that you might need unrestricted access to the funds. You can't withdraw while employed at the company sponsoring the retirement plan unless there is a special exception by your company such as being over age 59.5. If available, perhaps you can take a 401k loan and pay it back after closing and it won't count against your DTI.

No go on the Calpers. You don't have unrestricted access until separation of service, and that's only if you choose to lump sum rather than receive monthly retirement benefits.

Re: Reserves for mortgage - what can be considered reserves?

JVille — Sun, 18 Apr 2021 05:43:13 GMT

Just give them all 3 retirement accounts, most recent statements. Do NOT open the can of worms that is your side business.

Re: Reserves for mortgage - what can be considered reserves?

4sallypat — Sun, 18 Apr 2021 14:02:42 GMT

Thanks everyone!

Made it easy to understand what can be used for reserves...

Re: Reserves for mortgage - what can be considered reserves?

Anonymous — Mon, 19 Apr 2021 18:21:01 GMT

Are they just not wanting to know if you have enough in resrves to cover the Mortgage payment for 6-8 months in case of job loss etc.?

Re: Reserves for mortgage - what can be considered reserves?

4sallypat — Mon, 19 Apr 2021 21:00:13 GMT

@Anonymous wrote:
Are they just not wanting to know if you have enough in resrves to cover the Mortgage payment for 6-8 months in case of job loss etc.?

Yes, that is exactly what they were asking about.

I guess our 401k and 403b will be sufficient ?

Re: Reserves for mortgage - what can be considered reserves?

brk1971 — Tue, 20 Apr 2021 00:59:27 GMT

I believe the formula is 70% of vested balance on last quarterly. Caveat = I may be remembering the net worth calc, not sure if they're different.