What do lenders mean by reserves and how many months do I need?
Reserves are the liquid funds you still have after the down payment and closing costs are paid, measured in months of the new loan's full payment. Most investor loans require three to six months, construction loans often want 10 to 15 percent of the loan amount, and larger or multi-property borrowers are usually asked for six to twelve months.
What reserves are for
A lender wants to know that a vacancy, a repair, or a slow lease-up will not cause a missed payment in the first year. Reserves are the buffer. They are verified at closing but not collected; the money stays in your account.
Typical requirements by loan type
| Loan type | Typical reserve requirement |
|---|---|
| DSCR loan, one property | 3 months of the full payment |
| DSCR loan, over $1 million or several financed properties | 6 months |
| Conventional investment loan | 6 months per financed property in many cases |
| Bridge or hard money | 3 to 6 months of interest, often held as an interest reserve inside the loan |
| Construction loan | 10 to 15 percent of the loan amount |
| Agency multifamily | 6 to 12 months of debt service |
| SBA | Working capital sized to the business, often 3 to 6 months of expenses |
These are typical ranges. Each lender sets its own number and it moves with the risk of the file.
What counts as reserves
- Checking and savings. Full value, seasoned 60 days or more.
- Brokerage accounts. Full value with most lenders, sometimes discounted.
- Retirement accounts. Usually 60 to 70 percent of the vested balance, because of taxes and penalties on withdrawal.
- Cash-out proceeds from the same loan. Accepted by some lenders, not others.
- Business accounts. Accepted when you own the business and it can spare the funds.
What does not count: equity in other properties, credit card availability, unsecured lines, cryptocurrency with most lenders, and gift funds unless the lender specifically allows them for reserves.
How the months are calculated
The payment used is the full one: principal, interest, taxes, insurance, and HOA dues. On a loan with a $3,200 full payment, a six-month requirement is $19,200 in verified funds after closing. Lenders count reserves after the down payment and closing costs leave your account, so a borrower who empties every account to close will be short.
If you are short
- Reduce the loan amount. A smaller payment shrinks the requirement.
- Use a lender that counts retirement funds or cash-out proceeds.
- Add a co-borrower whose funds can be counted.
- Delay closing one or two pay cycles if the gap is small.
- Choose a product with a lower requirement. A DSCR loan at three months is easier than a conventional loan at six per property.
How CommFi handles it
Our lending desk reads your personal financial statement first and prices the deal against lenders whose reserve rules fit your liquidity. When it fits, the desk funds direct. When it needs a different box, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- What are reserves on a mortgage?
- Liquid funds you still have after closing, measured in months of the full payment. Lenders verify them but do not collect them.
- How many months of reserves do investor loans require?
- Three to six months is typical. Larger loans, several financed properties, and multifamily can push it to six to twelve months.
- Do retirement accounts count as reserves?
- Usually, at 60 to 70 percent of the vested balance. Some lenders count the full balance and some do not count them at all.
- Can cash-out refinance proceeds count as reserves?
- With some lenders, yes. Ask before you apply, because it can be the difference between approval and a shortfall.
- Are reserves the same as a down payment?
- No. The down payment is paid at closing. Reserves are what you have left afterward, and they stay in your account.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.