Cash or liquid assets a lender requires you to have remaining after closing, typically measured in months of mortgage payments.
Full Definition
Mortgage lenders often require borrowers to have reserves — liquid assets remaining after the down payment and closing costs are paid. Reserves are measured in months of PITI (principal, interest, taxes, and insurance). For example, 2 months of reserves means you need enough cash or liquid investments to cover two mortgage payments after closing. Requirements vary by loan type: conventional loans for primary residences may require 0–2 months; investment properties may require 6–12 months. Eligible reserves include savings accounts, checking accounts, CDs, and vested retirement accounts (at a discount). Reserves demonstrate financial stability and reduce lender risk.
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