# Mortgage reserve requirements: Fannie, Freddie, FHA, VA

Updated September 26, 2026

Reserves are the liquid assets a borrower still has after closing, counted in months of the housing payment on the subject property. On most conventional loans, the automated underwriting system sets the number. FHA requires three months of PITI on three- to four-unit properties, and VA has no general requirement unless rental income is used to qualify.

## Key numbers

- **6 months** DU base for 2- to 4-unit principal residences, investment property, cash-out over 45% DTI (B3-4.1-01)
- **2% / 4% / 6%** of other financed properties' aggregate UPB, added by DU on second homes and investments (B3-4.1-01)
- **3 months** of PITI for FHA three- to four-unit properties (II.A.4.d.i(C), II.A.5.c.i(C))
- **60%** of a retirement account's value, less loans, is the most FHA counts unless more is proven (II.A.4.d.iii(C), II.A.5.c.iii(C))

## The requirement at a glance

| Program | AUS loans | Manually underwritten | Retirement accounts | Gifts toward reserves |
|---|---|---|---|---|
| Fannie Mae | Set by DU: 0 / 2 / 6 months by transaction, plus other-financed-property reserves | Per the Eligibility Matrix | Vested amount. Must allow withdrawal regardless of employment status | Eligible personal gifts on principal residences and second homes, subject to donor and borrower-contribution rules. Not investment properties or gifts of equity (B3-4.3-04) |
| Freddie Mac | As stated on the LPA Feedback Certificate | 1-unit primary: none. 2- to 4-unit primary: six months | Vested amount, with documentation on withdrawals | Eligible personal gifts on primary residences and second homes, subject to donor and borrower-contribution rules. Not investment properties or gifts of equity (5501.4(a)) |
| FHA | 3-4 units: three months PITI. 1 unit + ADU using rental income: two months | 1-2 units: one month. 3-4 units: three months. 1 unit + ADU: two months. Gifts excluded | Up to 60% of value, less loans, unless a higher net amount is proven | TOTAL: not listed as excluded. Manual: excluded |
| VA | No general requirement. Reserves only when rental income is used | Same | No general valuation rule stated | Not for rental-income reserves |

## What is a "month"?

Fannie counts months of the qualifying payment on the subject property, based on PITIA (B3-4.1-01). FHA counts months of PITI.

Freddie uses the monthly payment amount: principal and interest, hazard insurance and taxes, plus mortgage insurance, leasehold, HOA dues and secondary financing where they apply. Subject-loan principal and interest must be based at least on the Note Rate (5501.2(a)).

## How does DU build Fannie's number?

The base is no minimum for a one-unit principal residence, two months for a second home, and six months for a two- to four-unit principal residence, an investment property, or a cash-out refinance with a DTI above 45%. High LTV refinances are exempt. Then DU adds two things. First, reserves equal to the balance of any 30-day accounts, reduced by any cash back on a refinance. Second, when the subject is a second home or investment property, a percentage of the aggregate unpaid principal balance on the borrower's other financed properties: 2% for one to four financed properties, 4% for five to six, or 6% for seven to ten (DU only). The aggregate excludes the subject property, the principal residence, properties sold or pending sale, and accounts paid off at closing. On top of that, "additional reserves may need to be verified based on DU's overall risk assessment" (B3-4.1-01).

Here's an illustrative case. An investment property purchase has a subject PITIA of $2,000. The borrower also owns a financed principal residence and two financed rentals with unpaid balances of $150,000 and $110,000, so four financed properties counting the subject. The subject needs 6 × $2,000 = $12,000. The other properties add 2% × $260,000 = $5,200, with the principal residence left out of the aggregate. The minimum is $17,200, plus anything else DU requires.

Simultaneous second home or investment property applications can share the same assets: "Reserves are not cumulative for multiple applications." For manually underwritten loans, the minimums are in the Eligibility Matrix. This guide doesn't quote Matrix values, because the Matrix PDF could not be retrieved from Fannie Mae's site when it was prepared.

## What about Freddie's manual loans?

One-unit primary residences need no reserves. Two- to four-unit primary residences need six months for the subject property. Home Possible and HeritageOne have their own rules (4501.7, 4504.7(b)). As with Fannie, the same assets may meet the reserve requirement for each of a borrower's applications (5501.2(b)).

## Which assets count?

Fannie defines reserves as liquid or near-liquid assets available after closing: checking and savings accounts, stocks, bonds, mutual funds, CDs, money market funds, trust accounts, the vested amount in a retirement account, and the cash value of a vested life insurance policy. "Funds to close are subtracted from available assets" (B3-4.1-01). Take these out of the count:

- non-vested funds
- funds that can be withdrawn only on retirement, employment termination or death
- unlisted stock, and non-vested stock options or restricted stock
- personal unsecured loans and rent-back credit
- interested party contributions and lender contributions
- cash-out proceeds from the subject refinance

FHA defines reserves as verified liquid assets "minus the total funds the Borrower is required to pay at closing." It excludes cash-out proceeds, incidental cash back, equity in another property and borrowed funds, and on manually underwritten loans, gift funds too (II.A.4.d.i(C), II.A.5.c.i(C)).

Freddie counts the borrower's assets remaining after closing. When reserves are needed to qualify, their sources must meet Sections 5501.3 and 5501.4. Cash-out proceeds and cash back on the subject refinance are not eligible (5501.3(c)).

## How do you value a retirement or investment account?

Fannie accepts vested IRA, SEP, Keogh and 401(k) funds. The lender verifies ownership and confirms the account "allows withdrawals regardless of current employment status," and the funds don't have to be withdrawn (B3-4.3-03). For stocks, bonds and mutual funds, "100% of the value of the assets" may count without liquidation (B3-4.3-01).

Freddie uses the vested amount. If evidence of liquidation isn't required, an employer plan must be documented as allowing withdrawals without severance from employment (5501.3(b)). Section 5501.3 states no percentage discount.

FHA takes "up to 60 percent of the value of assets, less any existing loans," unless the borrower gives conclusive evidence that a higher share can be withdrawn after taxes and penalties (II.A.4.d.iii(C), II.A.5.c.iii(C)). An illustrative TOTAL case: a three-unit purchase with PITI of $3,000 needs $9,000. If the only reserve asset is a 401(k) worth $20,000 with no loan, FHA counts up to $12,000 (60%) unless a higher net withdrawal is documented. That covers the $9,000 only if none of it is needed for closing.

VA has no general retirement valuation rule in Chapter 4. If an asset secures a loan, the usable amount is 60% of the current balance minus the loan balance (Topic 5.g).

## When do FHA reserves matter beyond the minimum?

On a TOTAL Scorecard loan, the mortgagee must "verify and document all assets submitted to the AUS." On manual loans, reserves can support the 37/47 and 40/50 ratio tiers (II.A.5.d.viii). They qualify as a compensating factor at three total monthly mortgage payments or more for one to two units, or six for three to four units, and for this test gifts are also subtracted from total assets (II.A.5.d.ix(B)).

Missing them is a rated defect. FHA's Defect Taxonomy treats failing to verify "reserves required for 3-4 unit properties and Manually Underwritten loans" as a Tier 2 or Tier 3 Borrower Assets defect, depending on FHA's view of whether the funds likely existed (Appendix 8.0).

## When does VA require reserves?

Only with rental income. VA "does not require the borrower(s) to have additional cash to cover a certain number of mortgage payments," though underwriters should weigh the borrower's ability to accumulate liquid assets (Topic 4.a). Under Topic 2.n, counting rental income from another property takes at least three months of PITI for each property, with no equity, no gift funds, and the money in the borrower's account before closing. Counting prospective rent from the other units of a multi-unit subject takes at least six months of PITI, plus landlord experience or a property manager.

The lender remains responsible for its underwriting and QC decisions.

## FAQ

**Does Fannie Mae require reserves on a one-unit primary residence?**
There is no minimum based solely on a one-unit principal residence. DU can still require reserves, including six months for a cash-out refinance with DTI above 45%, reserves for relevant 30-day accounts, and additional amounts based on its risk assessment. Follow the DU findings (B3-4.1-01). Manually underwritten loans follow the Eligibility Matrix.

**How many months of reserves does FHA require?**
Three months of PITI for three- to four-unit properties. Manually underwritten one- to two-unit properties need one month (HUD 4000.1 II.A.4.d.i(C), II.A.5.c.i(C)).

**Who decides reserves on a Freddie Mac LPA loan?**
LPA. The Seller verifies the reserves stated on the Feedback Certificate (5501.2(b)(i)).

## Sources

- Fannie Mae B3-4.3-04, Personal Gifts (02/04/2026): https://selling-guide.fanniemae.com/sel/b3-4.3-04/personal-gifts
- Freddie Mac Guide 4501.7, Home Possible LTV ratios, borrower contribution, reserves and sources of funds (Guide current through September 16, 2026): https://guide.freddiemac.com/app/guide/section/4501.7
- Freddie Mac Guide 4504.7, HeritageOne borrower contribution, reserves and sources of funds (Guide current through September 16, 2026): https://guide.freddiemac.com/app/guide/section/4504.7

- Fannie Mae Selling Guide, published September 2, 2026: https://selling-guide.fanniemae.com/
- Fannie Mae B3-4.1-01, Minimum Reserve Requirements (08/07/2024): https://selling-guide.fanniemae.com/sel/b3-4.1-01/minimum-reserve-requirements
- Fannie Mae B3-4.3-03, Retirement Accounts (06/30/2015): https://selling-guide.fanniemae.com/sel/b3-4.3-03/retirement-accounts
- Fannie Mae B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds (06/30/2015): https://selling-guide.fanniemae.com/sel/b3-4.3-01/stocks-stock-options-bonds-and-mutual-funds
- Freddie Mac Guide 5501.2, Reserves (effective 03/04/2026): https://guide.freddiemac.com/app/guide/section/5501.2
- Freddie Mac Guide 5501.3, Borrower personal funds (effective 07/01/2026): https://guide.freddiemac.com/app/guide/section/5501.3
- Freddie Mac Guide 5501.4, Other sources of funds (effective 07/01/2026): https://guide.freddiemac.com/app/guide/section/5501.4
- HUD Handbook 4000.1 (issued August 12, 2026; II.A.4.d, II.A.5.c, II.A.5.d and Appendix 8.0 dated 11/10/2026): https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf
- VA Pamphlet 26-7, Chapter 4, Credit Underwriting (updated August 26, 2026; Topics 2, 4 and 5 change date February 22, 2019): https://www.knowva.ebenefits.va.gov/system/templates/selfservice/va_ssnew/help/customer/locale/en-US/portal/554400000001018/content/554400000330850/VA-Pamphlet-VAP26-7-Chapter-04-Credit-Underwriting

This guide summarizes agency requirements as of the date above. It is not legal advice.