Lender · Sacramento, CA · Member since 2013 · 84 posts · 10 votes
looking at a duplex and just received a call from a loan officer/broker stating I'll need a reserve account with x amount of money in it since I'm planning to to rent out half the the home. I was going to do that on my own anyway but just wondering if this is normal?
Multi-family Investor · Anchorage, AK · Member since 2013 · 36 posts · 10 votes
12y
Troy is right. When we got conventional financing for our duplex we needed the reserves up until close. After that the funds are yours to do with as you please. Be sure to hold onto the funds until close though. We sent verification of the funds from our checking account multiple times, last time just a few days before closing.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
Yes, Fannie Mae and Freddie Mac has reserve requirements to get a loan. Lenders may impose higher requirements. Truly, they're looking out for you. If you put every dime you have into acquiring the property you won't have cash to handle the inevitable hiccups that occur with rentals.
Lender · Sacramento, CA · Member since 2013 · 84 posts · 10 votes
12y
I understand that, the house needs work though. I'll be living in one side fixing that up for a couple of months and then working on the other side. This will probably push the ability to rent this out at least 2-3 months depending on the amount of the reserve. I guess I just hate the fact that I won't be renting it for so long but will have this money sitting there probably gaining little to no interest.
Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
12y
You just need the funds in your bank account till you close, they're not held in escrow or anything, you could empty your bank account the day after closing. You can use the reserve any way you see fit after closing.
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
12y
All lenders that do non-owner occupied loans require reserves for each unit you own. As far as stocks go, most lenders will allow the use of stocks as reserve, however they will look at current market value of the stock and only count 60-75% of the value as reserves. This allows for some typical market fluctuations.
Have you considered buying the property using an FHA mortgage? Maybe an FHA 203k which allows you to buy the property as an owner occupied property and will also give you the money you need for the rehab costs. You can do this loan with 3.5% down and once the rehab is done, you can refi it into a conventional loan with better MI or no MI requirements.
Lender · Sacramento, CA · Member since 2013 · 84 posts · 10 votes
12y
I'd rather struggle for a few months than have to pay mortgage insurance for 10-30 years. I have the option to do 15% down with this company but I can liquidate my non-ira account if need be. Like this deal too much to let it slip by.
Multi-family Investor · Anchorage, AK · Member since 2013 · 36 posts · 10 votes
12y
Troy is right. When we got conventional financing for our duplex we needed the reserves up until close. After that the funds are yours to do with as you please. Be sure to hold onto the funds until close though. We sent verification of the funds from our checking account multiple times, last time just a few days before closing.
Lender · Sacramento, CA · Member since 2013 · 84 posts · 10 votes
12y
ok, sounds like I won't have to worry about this then. I'll work on getting more details tomorrow from the lender. Appreciate the info, advice, and input from everyone