Cash Reserves

Reserves are the savings still standing once the keys change hands. Measured in months of housing payments, they are what carries you through a job loss, a furnace that dies in January, or a stretch of reduced income. A cushion of several months of payments is a common target, separate from the cash you spent to close.

Lenders may also require reserves, with the amount varying by loan program, property type, and whether the home is a primary residence, second home, or investment. That requirement is a minimum, not a comfort standard. Draining your savings to make a larger down payment can backfire, since it trades a slightly smaller loan for a thinner safety net. The right reserve level depends on your job stability and the home.