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When applying for a mortgage as purchasing a home, there's lots said about expectations of down payment and monthly payment amounts, in terms of LTV, debt-to-income, and so forth. What's less broadly documented is how much cash lenders expect borrowers to have available to them net of the purchase costs - i.e. their savings to keep making payments if they were to incur a loss of income shortly after closing.

So, while I'm sure this is pretty widely variable among lenders, what are the general range of expectations? Something like the typically-advised 6 months emergency fund, covering all expenses?

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    while I'm sure this is pretty widely variable among lenders, what are the general range of expectations - you see the problem with your question, don't you?
    – littleadv
    Oct 23, 2023 at 22:47
  • If all you're looking for is a rule of thumb, websearching will find lots of opinions on what that threshold is likely to be. Note that this also depends on your income (and its reliability), your history of paying loans on time over a long time period, and anything else (that isn't a protected class) which may make the bank more or less happy about lending to you.
    – keshlam
    Oct 24, 2023 at 0:40
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    Lenders have never asked me for savings amounts (USA).
    – Mattman944
    Oct 24, 2023 at 0:40

2 Answers 2

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I don't think such a measure is used, nor it would be particularly useful. The fact that you have $X left over in your bank account at the time of closing says nothing at all about what level of savings you will have the very next day - you could go out and buy $X worth of furniture the day after closing. Prior to closing, a bank wants to see that you have sufficient funds for the down payment, and sufficient income to make installments on the loan. A modest lump sum leftover after the down payment obviously doesn't help make the down payment, and while it may cover the bills for a few months, it is not good evidence that you can make regular payments for years on end.

For it to be useful, the bank would need to see a continuous minimum balance in your account, not just a lump sum at the time of closing. But no bank that I know of enforces an obligation that borrowers maintain some minimum level of cash savings on an ongoing basis.

In one sense, mortgage lenders may require additional ongoing savings in the form of escrow. Typically, funds in escrow are earmarked for taxes and insurance and are effectively pre-payments of these bills, assuring the lender that it is essentially impossible for you to fall behind on these payments for several months into the future. Failure to pay taxes and insurance can have serious consequences outside the mortgage company's control, so it is a means of protecting their interest in your property.

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There is no official or published amount to have in savings or investments to qualify for a certain tier of rates. Even if there was, it would be subject to change and certainly vary by lender.

It would be logical for a lender to offer better rates to a borrower with a high savings balance to a similar buyer with lower balance. The former is less risky. However I have not heard of such a thing.

One thing that is necessary if for you to document the source of any down payment. Lenders will raise questions if you claim to be putting down a larger amount than you have in your savings/investment accounts. This is typically a sign that someone is receiving money from a relative or friend and frequently that is in the form of a loan.

Receiving down payment money in the form of a loan changes one debt-to-income ratio. It the loan is large enough, it could knock it out of bounds for the lender.

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