FHA reserve requirements for 2025

FHA loans make homeownership possible even if you’re starting with a smaller down payment or rebuilding credit. These loans allow as little as 3.5% down for borrowers with credit scores of 580 and above, and some applicants with scores between 500 and 579 may qualify with 10% down.

In most cases, reserves aren’t required. Still, understanding FHA reserve requirements for 2025 is key if you’re buying a 3 to 4-unit property or your loan is manually underwritten. We’ll guide you through what counts as reserves, when they’re likely to be required, and practical ways to build and verify them, so you can move forward. Just keep in mind that guidelines can change and lender overlays may apply.

What are mortgage reserves?

Mortgage reserves are liquid funds you have left over after closing on a home. They’re meant to cover mortgage payments if you run into unexpected expenses or loss of income.

While it’s prudent to set aside mortgage reserves for your own peace of mind, it’s typically lenders who require them. After all, they show that you’re less likely to default on the loan.

Eligible vs. ineligible sources for reserves

That said, not all assets qualify as mortgage reserves. Acceptable reserves generally include:

• Checking or savings accounts
• Certificates of deposit
• Stocks, bonds, and mutual funds
• Money market funds
• Trust accounts
• Retirement savings accounts
• Cash in vested life insurance policies

Meanwhile, unacceptable sources of mortgage reserves generally include:

• Funds that haven’t been vested, including stock options, restricted stock units, and retirement account balances
• Money that you can't access until you retire or leave your job
• Stock in unlisted corporations
• Funds from an unsecured loan
• Money you receive from another party that's interested in having the home sold, such as the current homeowner, a builder or developer, or the real estate agent
• Money that you receive from the lender, such as credits (upfront funds you receive in exchange for a higher interest rate) or other incentives

Do you need reserves for an FHA loan?

FHA loans generally don’t require mortgage reserves. However, there are certain situations when they do, such as when:

• Buying a 3 to 4-unit property
• The loan requires manual underwriting (i.e., underwriting without a computer algorithm)
• Your borrower profile is weak in other areas

How Many Months of Reserves Are Required?

Mortgage reserves are measured by how many months of mortgage payments they could cover, including principal, interest, taxes, insurance, and any association dues (PITIA).

For FHA loans, the reserve requirement varies by situation:

When Reserves Are Triggered

Again, the main triggers for an FHA loan reserve requirement are a high DTI, the use of manual underwriting, or the purchase of a 3 to 4-unit property.

FHA reserves for 3 to 4-unit properties (multifamily)

Only primary residences qualify for FHA loans (with few exceptions). However, you can still use an FHA loan to buy a property with up to four units, so long as you plan to live in one of them (aka house hacking).

Just be prepared to have at least three months' worth of mortgage reserves ready (or six if your DTI is over 43% and you lack compensating factors to make up for it).

Example: Documenting reserves for a multiunit purchase

To prove you have the required reserves for a multiunit property, share statements from your bank, retirement, or investment accounts that show your current balances. The lender will review these documents during the underwriting process.

FHA condo project reserve requirements (HOA rules)

To buy a condo with an FHA loan, you must verify that the condo association is FHA-approved. Among other things, this means it must have set aside at least 10% of its monthly unit assessments as a reserve.

A lower amount could be deemed acceptable by the FHA based on a reserve study completed not more than two years before a request for a lower reserve amount is received.

Using different sources for reserves

Fortunately, you have many options for FHA loan reserves.

Do gifts count toward reserves?

Gift funds are money from an eligible donor (typically a family member) to help with homebuying costs. While gifts can’t count toward reserves if they're equity gifts or already allocated to closing costs, any remaining non-equity gift funds left in your account after closing can qualify as reserves if the source documentation meets FHA standards.

Do 401(k) and retirement accounts count?

Yes, 401(k) and retirement account funds can count toward FHA loan reserves. However, you can typically only count 60% of the balance of these funds and none of any unvested funds.

Can cash-out funds be used as reserves?

Funds from a cash-out refinance on the property you are buying cannot be used as reserves. However, funds from a cash-out refinance on a different property may be eligible.

Reserves as a compensating factor

If you have a low credit score or high DTI, having ample reserves could serve as a compensating factor in your loan application. In other words, lenders may approve your loan despite weak performance in other areas of your finances.

How to build and document your reserves

To build a mortgage reserve, explore ways to save more money. For example, you could cut unnecessary spending, ask for a raise at work, or start a side hustle.

From there, you could store your reserve funds in a savings, money market, or retirement account for safekeeping. Then, when you apply for an FHA loan, you can save and share account statements with your lender to show proof of your reserve funds.

FHA vs. Other loan programs: Reserve rules at a glance

Of course, not all mortgages have the same reserve requirements. Here are some other loan programs to consider:

FAQs

Here are answers to frequently asked questions regarding FHA loan reserve requirements:

How many months of reserves are required for FHA?

Reserve requirements for FHA loans vary. If you buy a 1 to 2-unit property, generally there is no reserve requirement. However, if you buy a 3 to 4-unit property, the loan requires manual underwriting, or you have a weak borrower profile, you may be required to have up to six months of reserves.

Does FHA have a reserve requirement?

It depends. If you buy a 3 to 4-unit property, the loan requires manual underwriting, or you have a weak borrower profile, you may be required to have a reserve.

What are the reserve requirements for FHA condominiums?

Condos follow the same FHA loan reserve requirements as other property types. However, borrowers must also ensure the condo’s association is FHA-approved. Among other things, this means the association must have a reserve of at least 10% of its monthly unit assessments.

The bottom line

For most FHA buyers of 1 to 2‑unit primary homes, reserves aren’t required. You will need at least three months of PITI reserves if you’re buying a 3 to 4‑unit primary residence, and additional reserves may be requested when a loan is manually underwritten or your DTI is high as a compensating factor. Only your own verified, accessible funds count (checking/savings, marketable securities, and the vested/accessible portion of retirement accounts); gift funds generally can’t be used to meet reserve requirements. Guidelines can change, and lender overlays apply, so confirm the latest rules before moving ahead.

If you’re read to see how much you may qualify for, you can get prequalified with Rocket Mortgage and to see how many months of reserves you may need.

To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.

Rocket Mortgage is not acting on behalf of FHA or HUD.

Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.