Origination ActivitiesQuestion 263 of 400
A borrower with strong income but only 90 days of seasoning on a large deposit asks why 'reserves' matter. What are reserves in underwriting?
a.Liquid assets remaining after closing that could cover several months of mortgage payments
b.The lender's profit on the loan
c.The amount of the seller's concession
d.The appraiser's contingency fee
Explanation
Reserves are the borrower's liquid assets remaining after down payment and closing costs, often measured in months of PITI. They cushion against payment disruption and strengthen the file. They are not lender profit, seller concessions, or appraiser fees.
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