The money you have left over after you’ve paid your down payment and all closing costs are your Reserves. Kind of your “In Case of Emergency: Break Glass” money. Many loans require a minimum amount of reserves. Jumbo loans and loans for investment properties, tend to require more reserves.

Reserves are measured by dividing the dollar amount of reserves by your monthly payment. For example, you have $6000 in savings after closing and your new house payment is $1500, you have 4 months of reserves.

Different types of assets are tallied differently for purposes of figuring reserves. Funds in checking, savings or money market accounts are liquid and stable and counted at 100%. Stocks, bonds, mutual funds and other publicly traded securities are counted at 70%, to allowing for fluctuations in market value. Retirement funds can also be counted for most loans, but only to the extent that they are accessible in the event of a financial hardship. Retirement funds are counted at 60% to allow for market fluctuations and penalties.