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Reserve Funds Required for FHA Loan

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Established Member

Reserve Funds Required for FHA Loan

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 

Message 1 of 13
12 REPLIES 12
Valued Contributor

Re: Reserve Funds Required for FHA Loan

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.
Message 2 of 13
Valued Member

Re: Reserve Funds Required for FHA Loan

I was just approved for an FHA loan and was never told naything about having reserves.
Message 3 of 13
Established Member

Re: Reserve Funds Required for FHA Loan

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

Maybe I do! Maybe I do!
Message 4 of 13
Established Member

Re: Reserve Funds Required for FHA Loan

Thanks.  I have never heard of this before.  And, I suspected that this was not true.
Message 5 of 13
Established Member

Re: Reserve Funds Required for FHA Loan

Good info.  Thanks.  This board is awesome for weeding out bad info...
Message 6 of 13
Established Contributor

Re: Reserve Funds Required for FHA Loan

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.

4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Message 7 of 13
Valued Member

Re: Reserve Funds Required for FHA Loan

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.
Message 8 of 13
Super Contributor

Re: Reserve Funds Required for FHA Loan

fha does not require cash reserves, period 

Retired Lender
Message 9 of 13
Senior Contributor

Re: Reserve Funds Required for FHA Loan

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.
Message 10 of 13
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