Fannie Mae Reserve Requirements
In general, when you hear "Fannie Mae Reserve Requirements" it's referring to a reserve of cash or assets that may be used to make payments on the loan should anything happen.
Cash-out refinances and limited cash-out loans do not require reserves and therefore do not fall under this category. If you're seeking a loan for a primary or secondary home, all underwriters will determine, on a case-by-case basis, if your loan requires you to place assets in reserve in order to qualify.
If you're considering seeking a loan for an investment property, be aware that investment properties typically require a reserve of six months or more.
What are acceptable sources of reserves?
Acceptable reserves are any liquid financial asset that is readily available in:
- Checking or savings accounts
- Stocks, bonds, mutual funds, certificates of deposit (CDs), money market funds and trust accounts
- Amount currently vested in a retirement savings account
- Cash value of a vested life insurance policy
What are unacceptable sources of reserves?
Unacceptable reserves are any of the following financial instruments:
- Funds that have not been vested
- Funds that require retirement, employment termination or death before permitting withdrawal.
- Stock held in an unlisted corporation
- Non-vested stock options and non-vested restricted stock
- Personal unsecured loans
- Interested Party Contributions (IPCs)
- Cash proceeds from a cash-out refinance transaction on the subject property
Have questions about extenuating circumstances like commissions, alimony and child support? Review our additional forms of income for conventional loans.
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