The cash you have left over after closing, measured in months of total housing payments. Lenders want to see you can cover payments if your income hiccups. Usually 0-6 months required.
Reserves are the liquid funds you have available after you've made your down payment and paid closing costs. Lenders measure them in months of housing payments (PITI — principal, interest, taxes, insurance, plus any HOA).
Reserve requirements depend on the loan program, your credit profile, and the property type. Most conforming loans for owner-occupied primary residences require 0–2 months. Investment properties typically require 6 months or more. Jumbo loans often require 6–12 months.
Reserves can come from checking, savings, money market, brokerage, and retirement accounts (typically 60–70% of retirement balance counts toward reserves to account for taxes and penalties on early withdrawal).
Example
Your $400K home has a $2,572 PITI payment. After down payment and closing costs, you have $20K liquid. That's about 7.8 months of reserves — well above the typical 2-month conventional requirement. A jumbo lender would also be happy with that.
Also known as
cash reserves, mortgage reserves, post-closing reserves