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Reserves are liquid assets you have remaining after closing. Lenders require reserves as a safety net—proof you can make mortgage payments even if income disruptions occur. Self-employed mortgage programs typically require more reserves than conventional mortgages.

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How Reserves Are Measured

Reserves are expressed in months of PITIA—your total monthly housing payment including:
  • Principal
  • Interest
  • Taxes
  • Insurance
  • Association dues (HOA)
If your PITIA is $4,000 and you have $24,000 in eligible assets after closing, you have 6 months of reserves.

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Typical Reserve Requirements

ScenarioTypical Reserves Required
Primary residence6-12 months
Second home6-12 months
Investment property6-12 months
Loan amount over $1M12-18 months
Loan amount over $2M18-24 months
Multiple financed propertiesAdditional reserves per property
Lower credit scores or higher LTV may increase reserve requirements.

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How Reserves Differ by Program

Reserve requirements vary across the four self-employed loan types, reflecting the different levels of risk lenders assign to each income documentation method. Bank statement loans — Standard reserve requirements as shown above. Lenders view verified deposit history as relatively strong income evidence, so reserves follow the baseline ranges. 1099 loans — Reserve requirements are generally in line with bank statement loans. Some lenders require slightly higher reserves when the borrower has only one year of 1099 history or when income has declined year-over-year. P&L loans — Requirements are similar to bank statement loans, typically 6-12 months for a primary residence. Because the income figure comes from a CPA-prepared statement rather than directly observable deposits, some lenders add a month or two as a buffer. Asset depletion loans — Reserve requirements interact differently with this program because the same asset pool used for income qualification also serves as reserves. Lenders require that sufficient assets remain after the down payment, closing costs, and reserve requirement are all satisfied—and the remaining assets must still produce enough monthly qualifying income through the depletion formula. In practice, this means asset depletion borrowers need a larger total asset base than the income calculation alone would suggest.

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What Counts as Reserves

Fully eligible (100%):
  • Checking and savings accounts
  • Money market accounts
  • Certificates of deposit
Partially eligible (typically 60-70%):
  • Retirement accounts (401k, IRA)
  • Stocks and bonds
  • Mutual funds
Not typically eligible:
  • Business operating accounts (needed for operations)
  • Cryptocurrency (with most lenders)
  • Unvested stock options
  • Cash value life insurance (varies by lender)

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Documenting Reserves

Lenders verify reserves through:
  • Bank statements (most recent 2 months)
  • Investment account statements
  • Retirement account statements
Large recent deposits will require sourcing and explanation, just like with your income documentation.

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Reserves vs Down Payment

Reserve requirements are separate from your down payment. If you have $200,000 in savings and need $100,000 for down payment and closing costs, your reserves are what remains—$100,000. Make sure you have enough for both before applying.