     Patricia Holly (Househunting) | Wednesday, October 25, 2000 - 08:57 am 
I have read here and elsewhere that income to debt needs to be low but I also have heard that savings is very important in the mortgage approval process. Does a 401(k) and a Roth IRA count for savings? What are the percentages banks are looking for in terms of income to savings. |
| Christine Baker (Admin) | Wednesday, October 25, 2000 - 10:18 am
Yes, retirement accounts DO count and are highly regarded by underwriters since it shows that you are planning ahead.
There is no percentage or ratio for savings. For most loans you're supposed to have 2 to 3 months PITI (principal, interest, tax and insurance) AFTER closing as per the final loan application.
Higher reserves can overcome other problems with the loan. |
| Don Semler (Dsemler) | Wednesday, October 25, 2000 - 08:11 pm
Lender refer to savings as "Reserves". There is no set amount but as Christine mentioned you generally need at least two months when you close. With the advent of automated underwriting, reserves have become a big issue. Good reserves can make a weak deal get approved. 6 months to 1 yr PITI would be considered good.
When calculating reserved that are in a IRA/401k, we will only give you credit for 70% of the amount in those accounts. This is due to the IRS penalties that you would have to pay if you have to take the money out. |
