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Reserve Requirements

Does FHA have cash reserve requirements?

The FHA Mortgagee Lenders must verify and document reserves equivalent to three months’ Principal, Interest, Taxes, and Insurance (PITI) after closing for all FHA mortgages for 3-4 Unit multi family properties. For manually underwritten FHA mortgage approvals FHA mortgage lenders must verify and document reserves equivalent to (1) one months reserves PITI after closing for one- to 1-2  properties.   The FHA mortgage lenders  must verify and document all assets submitted to the (AUS) Automated Underwriting Systems.  Reserves refer to the sum of the borrower’s verified and documented liquid assets minus the total funds the borrower is required to pay at closing.

Manual Underwriting of the FHA Mortgage Applicant- reserves do not include:

  • the amount of cash taken at settlement in cash-out transactions;
  • incidental cash received at settlement in other loan transactions;
  • gift funds;
  • equity in another property; or
  • borrowed funds from any source.

Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) – reserves do not include:

  • the amount of cash taken at settlement in cash-out transactions;
  • incidental cash received at settlement in other loan transactions;
  • equity in another property; or
  • borrowed funds from any source.
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