Author: Dan Rafter / Source: Wise Bread
You know you need enough money to cover your down payment and closing costs when buying a home. But did you also know that most lenders want to see even more dollars stowed away in your checking or saving accounts before approving you for a mortgage?
It’s true: Lenders want to know that you have enough money saved to cover at least some of your future mortgage payments should you unexpectedly suffer a financial setback.
This is why it’s so important to save diligently before deciding to apply for a mortgage. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)The need for additional cash reserves
If you are buying a single-family home, most lenders require that you have at least enough money saved to cover two monthly mortgage payments. This can vary, though: Some lenders might require that you save enough money to cover six months’ worth of mortgage payments, while others might not require that you have any reserves built up at all.
The reason why most require at least two months’ reserves is because lenders want to be certain that you can cover some of your mortgage payments should you lose your monthly income stream or see it drop significantly. This offers protection for the lender, making it less likely that you’ll default on your loan.
Lenders aren’t just worried about the money you’ll need to cover your principal mortgage balance and interest, either. Because most homeowners pay additional funds each month to cover their homeowners’ insurance and property taxes, lenders want to make sure that you’ve saved enough to cover these expenses, too.
This means if your monthly mortgage payment, including taxes and…
The post How Much Money Do You Need in Savings When Applying for a Mortgage? appeared first on FeedBox.