Mortgage reserves are funds that your lender may require you to have remaining after you close on your home.
Unlike your down payment or closing costs, reserve funds are generally not spent during the purchase. Instead, they demonstrate that you'll still have sufficient financial resources after becoming a homeowner.
Depending on your loan program, reserves may be measured as a certain number of months of housing expenses, including:
Principal and interest
Property taxes
Homeowners insurance
Mortgage insurance (when applicable)
HOA or condominium dues
If reserves are required, Padzilly includes them in your Total Cash Needed so you have a more complete picture of the funds required to complete your purchase and satisfy your loan approval.
Not every loan requires reserves.