A file requires 6 months of reserves on a $2,300 PITIA and the borrower has $16,400 left after closing. Assuming the remaining funds are eligible and verified, does the borrower meet the six-month reserve requirement?
Correct Answer
A) Sufficient: 6 months at $2,300 is $13,800 and the borrower has more
A. The borrower meets the stated six-month reserve test. Required reserves are 6 × $2,300 = $13,800. Eligible funds of $16,400 exceed that amount by $2,600. Use funds remaining after closing, not funds already spent at closing. Scope and exceptions: Six months is a fact of this file, not a universal requirement. Asset eligibility and verification are expressly assumed; satisfying reserves does not mean the entire mortgage is approved. Source: What Are Liquid Financial Reserves? — https://guide-selling.fanniemae.com/sel/b3-4.1-01/minimum-reserve-requirements
Why This Is the Correct Answer
A. The borrower meets the stated six-month reserve test. Required reserves are 6 × $2,300 = $13,800. Eligible funds of $16,400 exceed that amount by $2,600. Use funds remaining after closing, not funds already spent at closing. Scope and exceptions: Six months is a fact of this file, not a universal requirement. Asset eligibility and verification are expressly assumed; satisfying reserves does not mean the entire mortgage is approved.
Why the Other Options Are Wrong
Option B: Sufficient: any funds at all remaining after closing meet a reserve test
Any positive balance is not enough; the required amount must be met.
Option C: Short: reserves must equal 6 months of the loan principal balance
The test uses the qualifying payment, not the principal balance.
Option D: Short: 6 months of reserves means 6 months of gross monthly income
Gross income is not the reserve-payment measure.
Exam Tip
Required months × qualifying monthly payment = required reserves.
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