Escrow PITI reserves?

Question

My understanding is that lenders look for 6 months PITI reserves. How do they know you would use those funds for PITI? Am i required to put that lumpsome in escrow? How impactful are piti reserves on rate, LTV and approval?

Stephanie Trevizo · Answer

Hi Khari, as Anthony mentioned, every lender is different.

When I've purchased or refi'ed I provided a bank statement where I had the reserves when purchasing a multi family. In theory there isn't really a way to guarantee you'd use those funds as your reserves, but it was one of the conditions to qualify in my case. I have client's who've also showed 401k statements or brokerage accounts as their reserves.

If you're referring to the "reserves" required for taxes and insurance, many times buyers pre fund an impound (aka escrow) account for these, which are paid as closing costs. I don't think of these as reserves, but I have heard people refer to it as such.

Anthony McEvoy · Answer

Hello @Khari F. - How do they know you would use those funds for PITI?  The banks are trusting that you will maintain some level of reserves.

Am i required to put that lumpsome in escrow?  I have never had to put money in an escrow unless it was for my personal residence.How impactful are piti reserves on rate, LTV and approval?  Every bank is different.  If the require it, then you need it.Your best course of action is to ask banks their lending requirements since every bank is different.