It makes it harder to qualify for the loan. Why Do Lenders Require Them. Cash-reserve requirements are intended to provide a safety cushion in case the borrower suffers a financial setback (such discover personal loan com/apply the loss of a job). With extra money in the bank, the homeowner would be able to cover his or her mortgage payments for a few months. So its basically a foreclosure-avoidance strategy.

But theres a major flaw with the concept of cash reserves. In theory, the borrower could spend that extra money two days after closing.

It wouldnt be the smartest move, but theres really nothing to prevent it from happening.

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However, before you decide to apply for a conventional loan, make sure to speak with at least a few mortgage professionals. Remember, each lender offers different rates, terms and fees, so it's best to receive a Loan Estimate (LE) prior to committing to one institution.

This additional research will help you secure the best mortgage terms discover personal loan com/apply for your future home loan. What Is a Conventional Mortgage. A conventional mortgage is a home loan that isnt guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac typically require down payments of at least 3.

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