topic Reserve Funds Required for FHA Loan in Mortgage Loans

Reserve Funds Required for FHA Loan

Creditfox — Mon, 20 Apr 2009 12:14:17 GMT

I was recently told that FHA requires you to have 3 months of mortgage payments in reserve (I assume in a savings account of some sort) to secure an FHA mortgage. The reserve is in addition to the 3.5% down payment.

I totally agree with the concept of having reserve funds available in case of an emergency. And, I will have funds on reserve. My only questions is whether or not this is a hard FHA requirement - I have never heard of this until last weekend while house hunting.

First, is this true? And second, can your 401K serve as proof reserve.

Thanks

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 12:18:23 GMT

I have always heard that reserves make a stronger file, but have not yet heard anything about it being a requirement of FHA. As far as I know, your 401k is considered reserves so long as you can access it.

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 12:32:16 GMT

I was just approved for an FHA loan and was never told naything about having reserves.

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 12:36:30 GMT

I've not been told such either, I was preapproved nearly a month ago.

Re: Reserve Funds Required for FHA Loan

Creditfox — Mon, 20 Apr 2009 12:39:22 GMT

Thanks. I have never heard of this before. And, I suspected that this was not true.

Re: Reserve Funds Required for FHA Loan

Creditfox — Mon, 20 Apr 2009 12:40:14 GMT

Good info. Thanks. This board is awesome for weeding out bad info...

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 13:00:32 GMT

In November I was told by an LO that I don't need reserves for an FHA loan. While it's possible that's changed in the last 5 months, it might be more possible that the requirement to have reseves is something that the lender you spoke with is requiring.

Lenders can add requirements to an FHA loan above what the government has set forth. For example, ther is no FICO score requirment for an FHA loan, but you'll be hard pressed to find a lender who will do an FHA mortgage loan for a mid score that's lower than 620. That's not an FHA requirment, but a lender's requirement.

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 15:04:00 GMT

From personal experience, our 401Ks were used towards our reserves- not sure if they used 100% of our 401ks or just the amount we could borrow from them.

Re: Reserve Funds Required for FHA Loan

DallasLoanGuy — Mon, 20 Apr 2009 16:10:15 GMT

fha does not require cash reserves, period

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 17:26:54 GMT

Like Dallas said, FHA does not require reserves but an individual lender can and often will. That said, if the file is borderline due to credit issues, dti or anything, reserves go a LONG way to getting an approval.

Re: Reserve Funds Required for FHA Loan

Anonymous — Mon, 20 Apr 2009 19:55:55 GMT

Hey Mickie,

I didn't know that reserves can sway an underwriter's decision. Wow, that brings a sigh of relief- I think. We're currently getting underwritten for a $370k loan, DTIs are close to the limit- but we're going in with about 15k in reserves (i'm including 50% of our 401Ks)-- will reserves really sway the underwriter in our favor, or are they looking for something more along the lines of 20-30k in reserves?

Just curious, as we're still waiting for the head cheese to give us the thumbs up and this wait is KILLING us!

Re: Reserve Funds Required for FHA Loan

Creditfox — Mon, 20 Apr 2009 20:32:39 GMT

mickie08 - thanks for the info. My ratios are good. My FICO scores are 755 EQ and 760 for TU. The home loan will be for around $380K.

In case of an emergency, I can withdraw from my 401K (although there will be a 10% tax penalty) which has a balance of around $70K. I assume that this is a good enough reserve for the lender.

Re: Reserve Funds Required for FHA Loan

DallasLoanGuy — Mon, 20 Apr 2009 21:19:30 GMT

Think of approval process like a teeter totter.

Good stuff on one side and bad stuff on the other.

Good reserves may balance out something on the bad side. Best to think of cash reserves as a 'compensating factor'