The full explanation
Under Fannie Mae's rules, they include money in checking or savings accounts, investments, the vested part of a retirement account and the cash value of a life insurance policy; personal loans and the money you use to close do not count. An eligible gift can also be used. How many months are required depends on the loan and the property.
An example
After paying the down payment and closing costs, the Ortiz family still has a few months' worth of house payments in their savings account. Those are their reserves, and the lender checks them on their statements.
You will see it in…
- The lender's requirements (“reserves” or “months of reserves”)
- The bank, savings or retirement statements you hand in with the application
- The rules for some loans that use a nontraditional credit history
