Assets & reserves: what counts and how much you need
Which funds can be used for down payment and closing costs, what “reserves” mean in months of PITI, and how to document everything so underwriting sails through.
What counts as assets
Underwriters need available, verifiable, and sourced funds. Common examples:
| Asset | How it’s documented |
|---|---|
| Checking & savings | Last 2–3 months of full PDF statements |
| Brokerage (stocks/ETFs) | Recent statement + trade confirms if liquidating |
| Retirement (401(k)/IRA) | Latest statement; if using, show eligible distribution/loan |
| Cash value life insurance | Statement showing accessible cash value |
| Gift funds | Lender’s gift letter + donor ability + transfer proof |
What usually doesn’t count
- Unverified cash or cash deposits without a paper trail
- Unvested RSUs or restricted stock not yet accessible
- Crypto in self-custody until liquidated and seasoned in a bank account
- Borrowed funds that create undisclosed debt (unless program-allowed and documented)
You can often use these funds if you convert them first (sell, transfer, season) and keep a clean trail. See paper trails that work.
Reserves explained (months of PITI)
Reserves are extra funds you’ll have after paying your down payment and closing costs. They’re measured in months of PITI (principal, interest, taxes, insurance—and HOA if applicable).
Typical expectations
- Primary residences: often 0–2 months
- Second homes: may require several months
- Investment properties: commonly higher reserves
Why reserves matter
They show you can afford payment shocks (rate, tax/insurance changes, vacancy for rentals). Exact amounts vary by program, risk, and lender.
Use the Mortgage Payment Calculator to estimate PITI and translate reserve requirements into a dollar target.
Seasoning & sourcing
- Seasoning means funds have been in your account long enough to appear on statements (often 60+ days).
- Sourcing means documenting where funds came from (payroll, sale, gift, transfer).
- Large deposits (not payroll) usually need a paper trail. Save receipts and statements from both sides of transfers.
Retirement accounts & loans
- You may count a portion of retirement balances toward reserves; rules differ by program.
- If taking a 401(k) loan, the new payment may count as debt—ask your lender how it impacts DTI.
- For distributions, collect the plan document, distribution/loan terms, and bank receipt showing funds received.
Talk to your loan officer before initiating a loan or distribution so you don’t trigger extra conditions close to closing.
Gifts, grants & down payment assistance (DPA)
- Gifts: use your lender’s gift letter; document donor ability and transfer path.
- Employer assistance / grants: keep award letter and disbursement proof.
- DPA programs: follow program rules on income limits, classes, and occupancy; expect extra paperwork.
Common pitfalls
- Moving money between accounts right before underwriting
- Uploading screenshots instead of full PDF statements (all pages)
- Cash deposits without documentation
- Forgetting that a 401(k) loan adds to your monthly obligations
Quick checklist
- Consolidate funds early; avoid last-minute shuffling
- Use native PDFs for statements and trade confirmations
- Save receipts for wires/ACH/Zelle/Venmo
- Document gifts with the lender’s template
- Target reserves in months of
PITI; confirm your program’s requirement
Disclaimer: Educational info only—not financial or legal advice. Requirements vary by lender, loan type, and state. Confirm specifics with your lender.