How much I should have in saving account?

[Anonymous]

Hi, mortgage experts or who have applied for a mortgage,

Is there a rule of thumb saying how much leverage we can use apply for a loan? Say, if I want to get $300K loan with an excellent score, I need to have 60K, which is 20% of $300K, in saving or something like that?

Another questions it, If Lenders may want to know overall asset I have, do 401K, CD and market value of stock investment count?

Thanks.

[ShanetheMortgageMan]

For any loan that requires a down payment you'll obviously need those funds - either from your own saved up income, gifts from family/relatives that you can document, etc.  There are also your closing costs, which a portion or even all of can be paid by the seller if you ask/negotiate for it in your purchase contract, so you may or may not need those funds.  Then in addition to those items some loan programs will require you have extra funds, called "reserves", which "2 months of reserves" is equivalent to 2 times your new proposed housing payment for the home.  2 months of reserves is a common requirement by conforming loan programs (Fannie Mae/Freddie Mac), however FHA, VA & USDA do not require any reserves.  In any situation, the more reserves you have the better you look to an underwriter.  As a personal comfort issue, I'd recommend you have at least 6 months reserves.

Yes stocks, bonds, mutual funds, trust accounts, checking, savings accounts, sale of personal assets, retirement accounts such as IRA's & 401k's, sales proceeds on a home that will sell prior to, cash value of life insurance, pooled savings/community savings funds, and business assets (provided you are 100% owner of the business) are several examples of what can qualify.

[Shogun]

Whenever you think you have enough, double it!

[Phitor]

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@Shogun wrote:

Whenever you think you have enough, double it!

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Under normal circumstances, yes. But currently, is this still the best advice?

Right now, timing is everything. It seems that the better advice for the immediate short term is to get in NOW on these extremely low home prices and record-breaking interest rates. Any delay by saving an additional liquid safety margin could ultimately wind up costing someone $100,000+ over the course of a 30 year morgage, if prices and rates start to revert.

Just wondering myself, really. Is my understanding of all this flawed?

[ShanetheMortgageMan]

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@Phitor wrote:

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@Shogun wrote:

Whenever you think you have enough, double it!

---

Under normal circumstances, yes. But currently, is this still the best advice?

Right now, timing is everything. It seems that the better advice for the immediate short term is to get in NOW on these extremely low home prices and record-breaking interest rates. Any delay by saving an additional liquid safety margin could ultimately wind up costing someone $100,000+ over the course of a 30 year morgage, if prices and rates start to revert.

Just wondering myself, really. Is my understanding of all this flawed?

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I think so.  I think the primary factor should be when someone is ready to buy a home - if they want to have 1 year in reserves and that is what makes them financially comfortable, and they have actually evaluated their finances, then buying before then could put them into financial jeopardy.