Skip to Content

Cash Reserves

I wanted to talk a little bit about cash reserves on Jumbo loans, and other loans. Cash reserves are only typically needed on a jumbo loan. You may find that you need them on a conforming loan. Fannie Mae, Freddie Mac, FHA, VA, those typically don’t require cash reserves. In some instances, they do. Always ask your lender, “Hey, does my loan require cash reserves?”

Cash Reserves Jumbo loans

But for sure, on a jumbo loan, you’re going to need cash reserves. And different lenders have different requirements. So you have to ask your loan officer, “The lender that you plan to use for my loan, what are their cash reserves requirements? Is it 6 months of cash reserves? Is it 12 months of cash reserves?” They may have cash reserve requirements for a rental property.

An example

Let’s say you’re buying one new property. And you have a second home and a rental property. They’ll have cash reserve requirements for your vacation home/second home, for your rental property, and the new primary residence. So it could be six months for each. That could be 18 months of cash reserves. So always ask your lender about that. And, and the definition of cash reserves is also a little funny.

What counts as cash reserves?

You would think it is literally cash, it’s cash. If you want 12 months of cash reserves, it’s based on your new monthly payment. If your new monthly payment is $4,000 a month, they want $48,000 in cash reserves. So do you have above and beyond what you need for your down payment and closing costs, let’s say in this instance, another $48,000 in cash reserves? So the numbers can get pretty big. Or if you need 18 months of cash reserves, that could be a, a really large number.

Or sometimes I’ve seen a lender say, “It’s 12 months cash reserves, but six of it is cash, and six of it can come from a retirement account.” That’s interesting that you would call that cash reserves, because a retirement account isn’t very liquid. I don’t consider that cash.


Always ask your lender, certainly on a jumbo loan, “Do I need cash reserves?” Number one. “How much do I need, how many months worth?” Number two. And then number three, “What accounts can I use to satisfy that cash reserve requirement. Will a retirement account, account for some or all of it maybe?” The guidelines are in a constant state of flux so that’s why it’s always good to ask your loan officer what are the the latest guidelines.

I hope that helps check in with questions.

Contact me to discuss your mortgage scenario, mortgage rates, or other mortgage questions. Click here to schedule a call or you can email me directly.