Question

What are mortgage lender in the state of ohio that do not require a cash reserve when purchasing an investment property?

Answer 1

How Much Do You Need in Cash Reserves?

The exact amount of cash reserves you’ll need will depend on your loan type, your credit score, and the amount of your loan vs. the purchase price, or the loan-to-value ratio. You can assume, however, that lenders will want to see at least a few months of housing payments in liquid assets.

FHA Loans

On FHA loans, you’ll need enough to cover at least three months of your expected total mortgage payment. If you’re an investor looking to buy a three- or four-unit property, you’ll need enough for at least six monthly payments.

Conventional Loans

The required cash reserves for conventional loans, like those backed by Fannie Mae and Freddie Mac, can range from zero to six months’ worth, depending on your credit score and other factors. If you’re buying an investment property, you’ll need anywhere from two to 12 months of payments, depending on the size of the home, your credit score, the loan-to-value ratio, and the number of properties you currently have financed.

VA and USDA Loans

VA and USDA loans don’t require cash reserves, as long as you’re buying a single-family home you intend to occupy. Investors, on the other hand, need three to six months of reserves with VA loans, and three months with USDA loans

If You Don’t Have Enough Cash for Your Reserve

If you don’t think you have enough liquid savings to meet the reserve requirements, don’t panic. First, you may not need as much as you think, especially if you have strong credit and have a low loan-to-value ratio. And if you qualify for a VA or USDA loan, you may not need any cash reserves at all.

Otherwise, you’ll either need to increase your savings, or beef up your other qualifications in order to qualify for a lower reserve.

Other Cash You Will Need

Remember that your reserves aren’t the only cash you need to purchase a house. In addition to these funds, you’ll also need money for your down payment and closing costs. While down payments vary widely, closing costs tend to clock in between 2% and 5% of the purchase price1.

Finally, even if you have enough cash to cover all your loan requirements, keep in mind that homeownership often comes with unexpected expenses and repair bills. So it doesn’t hurt to save more, in order to make sure you still have a financial safety net once you’ve closed on the loan.