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When it comes to securing a mortgage in Georgia, understanding the requirements for PITI (Principal, Interest, Taxes, and Insurance) reserves is crucial. Whether you’re looking at conventional loans or FHA loans, knowing the specifics can help you better prepare for the home-buying process.
Conventional Loans
For those considering conventional loans in Georgia, the reserve requirements can vary based on the type of property and the borrower’s financial situation. Here’s a breakdown:
1. 2–4-Unit Properties (Primary or Investment)
– Reserves Required: 6 months
– Whether you’re buying a multi-unit property as your primary residence or as an investment, you’ll need to have six months’ worth of PITI reserves.
2. Cash-out transactions with a DTI Over 45%
– Reserves Required: 6 months
– If your debt-to-income (DTI) ratio exceeds 45% and you’re looking to take cash out, be prepared to show six months of reserves.
3. Investment Properties Owned by the Borrower
Reserves Required:
– 2 months per property for up to 6 financed properties
– 8 months for 7-10 financed properties
– This means if you own multiple investment properties, you’ll need to have reserves for each one, scaling up as you own more properties.
4. Second Home
– Reserves Required: 2 months
– For those purchasing a second home, two months of reserves are necessary.
FHA Loans
FHA loans are known for their more lenient requirements, but they still have specific reserve needs, especially for multi-unit properties and manual underwriting scenarios.
1. 3-4 Unit Properties
– Reserves Required: 3 months (TOTAL scorecard)
– Note that manual underwriting may require additional reserves.
2. Manual Underwriting
Primary 1- or 2-Unit Property:
– **Reserves Required:** 1 month for up to 45% DTI, 2 months for up to 50% DTI
– **Primary 3-4 Unit Property:**
– **Reserves Required:** 6 months
Compensating Factors
For borrowers with compensating factors, the reserve requirements can be slightly different:
1. Primary 1–2-Unit Property
– Reserves Required: 3 months
2. Primary 3–4-Unit Property
– Reserves Required: 6 months
Understanding the PITI reserve requirements for both conventional and FHA loans can help you better prepare for your home purchase in Georgia. Whether you’re buying a primary residence, a second home, or an investment property, knowing these details can give you a clearer picture of what to expect and how to plan your finances accordingly.
For more information and personalized advice, connect with one of our mortgage experts who can guide you through the process and help you find the best mortgage solution for your needs.
