OK, I think I’m confused. Am I correct that I need to have X months of PITI reserved before I can purchase an investment/rental property?
I understand the need for the cushion - in case the renters flake out, but am I supposed to save this before I buy /qualify for the loan?
good grief.
In general, lenders require 6 months of piti. There are a couple however that will only ask for 2 months.
If assets are not available lenders also have programs such as “stated assets” and “no documentation” loans.
The asset requirements must be met by a liquid account where the funds have been available for at least 2 months. Most lenders will not allow for any type of cash out refinance to be used for reserve requirements. Only for down payment and closing costs.
Fannie Mae Guidelines say you need 6 mo piti for EACH investment property you own and 2 mo piti for your primary.
So if you have two rentals at $600.00 Piti each and your primary residence is 1000 piti then you would need $2200 in reserves.
Please be advised that the information posted above is not entirely accurate. The reserve requirement for investment properties is as follows.
1 unit = 2 months piti
2-4 unit = 6 months piti
(owner occupied) = no reserve requirement
Reserve requirements must be met for any properties that will be delivered to FNMA. (This is for loans being submitted and does not apply to properties already owned).
Remember that these are FNMA guidelines and that each lender may have their own procedures implemented in addition these which may require more.