Reserves - Pylon Developer Platform (PDP)

Reserves are liquid assets that borrowers must maintain after closing and cannot be used for down payment or closing costs. Reserves provide a safety cushion, ensuring borrowers can continue making mortgage payments even if they experience temporary income loss, unexpected expenses, or other financial disruptions. Reserves are typically expressed as a multiple of the monthly housing payment (PITIA). For example, a requirement of “6 months of reserves” means the borrower must have liquid assets equal to 6 months of PITIA remaining after closing.

Why reserves are required

Lenders require reserves to:

Protect against payment default - Reserves ensure borrowers can make payments during temporary financial hardship
Demonstrate financial stability - Having reserves shows the borrower has financial discipline and planning
Reduce loan risk - Borrowers with reserves are less likely to default, reducing risk for lenders and investors
Meet program requirements - Many loan programs (especially jumbo and investment property loans) mandate reserve requirements

How reserves are calculated

Pylon automatically calculates reserve requirements based on the loan program, property type, and loan amount. Reserves are calculated as:

Required Reserves = Number of Months × PITIA

Where:

Number of Months = The reserve requirement for the loan program (e.g., 6 months, 9 months)
PITIA = Principal, Interest, Taxes, Insurance, Association fees (the complete monthly housing payment)

The system determines available reserves by subtracting funds needed for down payment and closing costs from total liquid assets.

Reserve requirements by loan program

Reserve requirements vary significantly by loan program and loan characteristics:

Loan Program	Property Type	Loan Amount	Reserve Requirement
Conventional	Primary residence	Any	0-2 months (varies by program)
FHA	Primary residence (1-2 units)	Any	0 months
FHA	Primary residence (3-4 units)	Any	3 months PITIA
Jumbo	Primary residence	≤ $1,000,000	6 months PITIA
Jumbo	Primary residence	$1,000,001 - $1,500,000	9 months PITIA
Jumbo	Primary residence	$1,500,001 - $2,000,000	12 months PITIA
Jumbo	Primary residence	$2,000,001 - $3,000,000	24 months PITIA
Investment property	Investment	Any	6 months PITIA (typical)
Second home	Second home	Any	2-6 months PITIA (varies)

Guidelines to consider

Multiple properties

When borrowers have multiple financed properties, reserve requirements typically increase. Each additional financed property may require 2-6 months of PITIA in additional reserves, depending on the loan program. Example with multiple properties:

Property	PITIA	Reserve Requirement	Reserves Needed
Primary residence	$8,500/month	6 months	$51,000
Investment property #1	$3,200/month	6 months	$19,200
Investment property #2	$2,800/month	6 months	$16,800
Total reserves required			$87,000

The reserve requirement applies to each property’s PITIA. Only properties with liens (mortgages) typically count toward reserve requirements.

Property type considerations

Primary residence: Typically requires 0-2 months for conventional loans, 0 months for FHA (1-2 units), but 6-24 months for jumbo loans depending on loan amount
Second home: Typically requires 2-6 months of PITIA
Investment property: Typically requires 6 months of PITIA per property
Multi-unit properties: FHA requires 3 months PITIA for 3-4 unit properties

Loan amount considerations

For jumbo loans, reserve requirements increase with loan amount:

Loan Amount	Reserve Requirement
≤ $1,000,000	6 months PITIA
$1,000,001 - $1,500,000	9 months PITIA
$1,500,001 - $2,000,000	12 months PITIA
$2,000,001 - $3,000,000	24 months PITIA

Example calculation

Here’s a simple example of how reserves work: Loan details:

Loan amount: $1,200,000 (jumbo loan)
PITIA: $8,500/month
Reserve requirement: 9 months of PITIA

Calculation:

Required reserves: 9 months × $8,500/month = $76,500

The borrower must have at least $76,500 in liquid assets remaining after closing (after down payment and closing costs are paid). Pylon automatically calculates this by subtracting funds needed for closing from total assets.

What counts as reserves

Reserves must be liquid assets that remain available after closing. The same asset types that can be used for down payment can typically be counted as reserves, but with important distinctions:

Asset Type	Can Count as Reserves	Notes
Checking accounts	Yes	Must remain after closing
Savings accounts	Yes	Must remain after closing
Money market accounts	Yes	Must remain after closing
Retirement accounts	Varies	May require documentation of withdrawal ability
Investment accounts	Yes	Current market value
Gift funds	No	Gifts are typically used for down payment, not reserves
Sale proceeds	Yes	If sale closes before or simultaneously

Key distinction: Down payment vs. reserves

The same dollar cannot be used for both down payment and reserves. The system calculates available assets after subtracting funds needed for down payment and closing costs. Example:

Scenario	Total Assets	Down Payment Used	Available Reserves
Scenario 1	$100,000	$80,000	$20,000
Scenario 2	$100,000	$60,000	$40,000

In Scenario 1, only $20,000 is available for reserves. In Scenario 2, $40,000 is available. The same $100,000 cannot cover both a large down payment and substantial reserves.

Querying reserves in GraphQL

To check reserve requirements and available reserves for a loan:

query GetLoanReserves($loanId: ID!) {
  loan(id: $loanId) {
    id
    productPricingRate {
      monthlyPayment
      pitia {
        principalAndInterest
        taxes
        mortgageInsurance
        homeownersInsurance
        hoaDues
        floodInsurance
      }
    }
    deal {
      borrowers {
        id
        assets {
          id
          amount
          __typename
        }
      }
    }
  }
}

The monthlyPayment field represents PITIA. Multiply this by the required number of months to calculate reserve requirements. Compare this to the total of available assets (after subtracting down payment and closing costs) to verify reserves are met.

Principal, Interest, Taxes, Insurance, Association (PITIA) - How PITIA is calculated
Assets - What assets can be used for reserves
Loan-to-Value (LTV) - How down payment affects reserves
Loan - How reserves are tracked in loans

​Why reserves are required

​How reserves are calculated

​Reserve requirements by loan program

​Guidelines to consider

​Multiple properties

​Property type considerations

​Loan amount considerations

​Example calculation

​What counts as reserves

​Key distinction: Down payment vs. reserves

​Querying reserves in GraphQL

​Related concepts