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What exactly count as cash "reserves"?

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Anonymous
Not applicable

What exactly count as cash "reserves"?

I've done a bit of internet research but have found some conflicting information. When mortgage lenders look at an applicant's cash "reserves," what exactly qualifies as such? How liquid do they have to be? I know that savings accounts, CD's, and C-notes stashed in a coffee can in your toolshed count as reserves. But what about EE Savings Bonds that have not yet reached face value, or 401(k)/403(b)funds, mutual funds, T-Bills, and life insurance cash values? I read somewhere that 401(k)/403(b) funds can count, but only up to a certain percentage. Or is it up to the lender to decide how cash reserves are qualified? Thanks to anyone who can help clear this up for me.

Message Edited by taz on 11-19-2007 01:54 PM
Message 1 of 6
5 REPLIES 5
ShanetheMortgageMan
Super Contributor

Re: What exactly count as cash "reserves"?

Checking/savings, CD's, mutual funds, stocks, brokerage accounts are all usuable.  70% of IRA's & 401k's & 403b's which can be liquidated without termination or death will be used... 70% is the percentage because of taxes you'd have to pay if you were to cash them in.  Certain retirement accounts that are only accessible after termination or death will not be considered. Cash value of life insurance policies can also be used. 
 
C-notes stashed in a coffee can in your toolshed would normally not count as reserves, unless the program permits "cash on hand" to qualify... but usually in that situation you have to fit the profile of someone who doesn't normally use depository institutions.
 
Since qualifying reserves vary from program to program, and even lender to lender, it's best to find out which lenders & programs will count your reserves... or what reserves you need to qualify with a particular lender/program.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 6
Anonymous
Not applicable

Re: What exactly count as cash "reserves"?

we have a profit sharing account at my job that we are fully vested in.....We can get when we leave our job....would that count as cash reserves?
Message 3 of 6
ShanetheMortgageMan
Super Contributor

Re: What exactly count as cash "reserves"?



Badcreditguy wrote:
we have a profit sharing account at my job that we are fully vested in.....We can get when we leave our job....would that count as cash reserves?


Are you able to access the funds now?  If the account allows for withdrawals only in connection with your employment termination, retirement or death, the retirement account can't be used.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 6
Anonymous
Not applicable

Re: What exactly count as cash "reserves"?

Thanks, Shane! It's great having industry professionals on the board like you and mortgage guy.
Message 5 of 6
ShanetheMortgageMan
Super Contributor

Re: What exactly count as cash "reserves"?

Welcome!
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 6
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