How much savings do you need to buy a house? In 2026, the answer depends on three distinct cash buckets: the down payment (as low as 0% on VA and USDA, 3% on Conventional, 3.5% on FHA, or 10-20% on jumbo), closing costs (typically 2% to 5% of the purchase price for the buyer), and post-close cash reserves (0 months on VA and USDA, 0-6 months of PITI on Conventional and FHA depending on your file, and 6-12 months on jumbo). On a $600,000 home with 10% down, that math works out to roughly $60,000 down + $12,000 to $30,000 in closing costs + $0 to $30,000 in reserves — so $72,000 to $120,000 in total savings at the time of application. The reserve requirement is the bucket most buyers never plan for, and it is why underwriting approval can come down to the last $10,000 in your account.

This guide breaks down each cash bucket, the reserve requirements by program (verified 2026), what assets count toward qualification, the 60-day sourcing rule, how gift funds and seller credits work, and the seven asset mistakes that quietly kill approvals.

The Three Cash Buckets — Down Payment, Closing Costs, Reserves

Buyers tend to focus on the down payment and ignore the other two. All three are documented on the closing disclosure, and the underwriter looks at your bank statements for all three combined, not just the one you were planning for.

Bucket 1: Down Payment

How much the lender requires you to put in. Minimums in 2026:

• VA: 0% (eligible veterans and active-duty service members)
• USDA: 0% (rural-eligible areas, household income limits apply)
• Conventional: 3% (HomeReady / Home Possible first-time buyer programs); 5% standard
• FHA: 3.5% with FICO 580+; 10% with FICO 500-579
• Jumbo: typically 10-20%, depending on loan amount and FICO

Full breakdown in Day 2: how much down payment you actually need.

Bucket 2: Closing Costs

Buyer-side closing costs typically run 2% to 5% of the purchase price, including:

• Lender fees: origination, underwriting, processing, appraisal, credit report
• Title and escrow: lender’s title insurance, escrow fee, settlement fee, recording
• Prepaid items: property tax escrow (typically 2-6 months at close), homeowners insurance (12 months prepaid), prepaid interest from close date to end of month
• Third-party: home inspection, HOA transfer fees, pest/termite inspection where required
• Owner’s title insurance: optional in CA, often customary; required or customary in many other states

On a $600,000 home, 2% to 5% is $12,000 to $30,000. The variability is driven by: your state’s tax escrow months, your closing date within the month (prepaid interest), your HOA, and whether the seller is contributing (see “interested-party contributions” below).

Bucket 3: Post-Close Cash Reserves

Money the underwriter wants to see remaining in your accounts after you’ve closed and paid everything. One month of reserves = one full PITIA payment (principal + interest + taxes + insurance + HOA + mortgage insurance).

Reserves are a cushion the GSEs and the FHA want to see so that if your income stops for a few months, you can keep making payments. On strong files, DU/LPA may require zero reserves; on tight files (high DTI, high LTV, lower FICO, cash-out, investment), it can call for 2 to 6 months.

Reserve Requirements by Program (2026)

The biggest insider point: VA requires zero reserves on a 1-unit primary residence purchase. Combined with 0% down and no VA credit-score price adjustments (lender pricing still varies by credit), VA is often one of the most affordable routes to a first home for eligible veterans. Our VA loan page walks through the full stack.

What Counts as Assets for Mortgage Qualification

Not every account you have will be fully counted toward the funds-needed-to-close test. Here is what underwriters credit:

• Checking, savings, money market: 100% of the balance (two most recent monthly statements)
• CDs: 100%
• Stocks, bonds, mutual funds: Fannie Mae can count 100% of value; some lenders apply a 70% haircut, and you must document liquidation if the funds are needed to close.
• Vested 401(k) / 403(b): Fannie Mae can count 100% of the vested balance toward reserves; some lenders apply a 60-70% haircut. Funds needed to close must be withdrawn or borrowed and documented.
• Vested IRA: same treatment as 401(k); haircuts vary by lender.
• Gift funds: 100% with proper gift letter + donor documentation
• Business accounts: can be sourced with CPA letter stating withdrawal will not harm the business (common for self-employed borrowers)
• Proceeds from the sale of another property: 100% with executed HUD-1 / Closing Disclosure
• Proceeds from the sale of personal property (car, art, collectibles): allowed with bill of sale + evidence of the item’s prior ownership and value

What does NOT count: cash (bills under the mattress), unverified crypto, pending inheritance without probate, loans from individuals, undocumented large deposits, or anything you cannot source and season (see next section).

The 60-Day Sourcing and Seasoning Rule

Underwriters pull the two most recent monthly statements for every account you declare. For each unusual deposit on those statements, they want:

• A copy of the check or wire transfer
• Documentation of where the money came from (sale, bonus, tax refund, gift letter)
• If a deposit is more than roughly 50% of your monthly income or appears random, expect to source it

“Seasoned” funds have been in your account for the full 60-day window shown on the statements. Money that was there the whole time generally does not need to be sourced. Money that showed up mid-window usually does.

The planning move: make any large deposits (sale of a car, bonus, cash gifts) at least 90 days before you apply. By the time you apply, those funds have been in your account long enough to clear the 60-day window on both of the two statements the underwriter will pull.

Gift Funds — Who Can Gift, How Much, and How to Document

Gift funds are legitimate across every program, but each has its own rules.

Conventional (Fannie Mae and Freddie Mac)

Gift funds are allowed for the entire down payment, closing costs, and reserves on a primary residence purchase. No minimum borrower contribution is required on most programs. Donors can be: spouse, child, sibling, parent, grandparent, aunt/uncle, domestic partner, or someone with a defined kinship. Not allowed: anyone with an interest in the transaction (seller, builder, real estate agent, lender).

FHA

FHA allows 100% gift funds on down payment, closing costs, and reserves. Donor can be family, employer, labor union, charitable organization, or a government assistance program. The gift letter must state the donor’s name, relationship, amount, source, and that no repayment is expected.

VA

VA allows 100% gift funds similarly. Donor cannot be an interested party. Gift letter + donor documentation required.

USDA

Allows gift funds from family members and employers. Follows FHA-style documentation.

Gift letter must include: donor name, address, phone, relationship to borrower, exact dollar amount, property address, statement that no repayment is required, and donor signature. Keep the gift documented from BOTH sides — the donor’s account statement showing the funds leaving, and your account statement showing them arriving.

Interested-Party Contributions (Seller Credits)

The seller can contribute toward your closing costs. These are called interested-party contributions (IPCs) or seller concessions. 2026 program limits:

Insider move for first-time buyers in a buyer-friendly market: ask the seller to credit 2% to 3% of the purchase price toward your closing costs. In many 2026 markets with sitting inventory, sellers accept these in lieu of a price reduction. On a $600,000 home, a 3% credit is $18,000 — often enough to cover most or all of your closing costs. Our Compare Mortgage Offers page accepts seller credits as an input so you can see your true cash-to-close side by side across lenders.

401(k) and IRA for Down Payment

Two paths: borrow against or withdraw from a retirement account.

401(k) loan

You can typically borrow up to 50% of your vested balance (max $50,000) and repay over 5 years, or longer if used for a primary residence purchase. The loan interest you pay goes back to your own account. Loan payments do NOT count against your DTI on conventional loans (the loan is secured by your retirement, not an obligation to a third party). FHA and VA generally treat them the same. See Day 4: DTI for more.

401(k) withdrawal (hardship)

A hardship withdrawal for a primary residence down payment is allowed on most plans. If you’re under 59½, the amount withdrawn is taxed as ordinary income plus a 10% early-withdrawal penalty. For most buyers in a 22%-24% tax bracket, that is a 32%-34% total hit on the withdrawn amount — often more than the down payment benefit. Loan is usually the better route.

IRA $10,000 first-time buyer exception

If you are a first-time home buyer (per IRS definition: no primary residence ownership in the prior 2 years), you can withdraw up to $10,000 from an IRA penalty-free for a home purchase. You still owe income tax on a traditional IRA withdrawal, but no 10% penalty. Roth IRA contributions can be withdrawn tax-free and penalty-free at any time; earnings have additional rules. Check IRS Publication 590-B before withdrawing.

7 Asset Mistakes That Quietly Kill Approvals

1. Large unexplained deposits. Depositing $8,000 cash two weeks before applying triggers a sourcing request you may not be able to answer. If the money came from a wedding gift, document it in writing from the giver at the time of deposit.
2. Moving money between accounts right before applying. Underwriters still want to see all source accounts. Shuffling creates “ghost deposits” that need sourcing.
3. Cash under the mattress. Cash that has never been in a bank account generally cannot be used until it is deposited and seasoned. Deposit it 90+ days before applying and keep a paper trail from wherever it originated.
4. Closing accounts right before applying. The account history is gone. Lenders may ask about missing accounts from your credit report.
5. Co-mingling business and personal money. Self-employed borrowers who use business accounts for personal expenses create sourcing complications. Keep clean separation starting 90 days out.
6. Selling investments without a paper trail. Need: trade confirmation, settlement date, transfer into checking. Rushed sales without this paper trail look like unexplained deposits.
7. Forgetting the seasoning window. You cannot “just move money” the week before close. Everything the underwriter will see has to be either sourced on the spot or seasoned through the 60-day statement window.

First-Time Buyer Programs That Reduce the Cash Hurdle

• Fannie Mae HomeReady: 3% down, reduced mortgage insurance, income limits (up to 80% area median income). Gift funds OK; non-borrower household income can factor in.
• Freddie Mac Home Possible: 3% down, reduced MI, similar income limits.
• FHA: 3.5% down with FICO 580+. 100% gift funds allowed. No income limit.
• VA: 0% down, no mortgage insurance, no reserves, no VA credit-score price adjustments (lender pricing still varies by credit), 4% seller credit allowed.
• USDA: 0% down, income limits, geographic restrictions.

What to Do Next

1. Build the three-bucket spreadsheet for your target price point. Our affordability calculator gives the full monthly picture; a few lines of math give you the cash picture.
2. Pull your actual mortgage FICO (Day 3) and real DTI (Day 4) — both affect which program is cheapest for you.
3. Confirm your qualifying income (Day 1) and the right down payment option (Day 2).
4. Compare the final numbers. Use our Compare Mortgage Offers page to see rate, APR, monthly payment, cash to close, and total cost side by side across lenders.

Day 5 of our 30-day homebuyer essentials series. Day 6 (tomorrow, Wednesday Oct 21) will cover employment history and the two-year rule.

Frequently Asked Questions

How much savings do I really need to buy a house in 2026?

Plan for three cash buckets: down payment (0% VA/USDA, 3% Conv, 3.5% FHA, 10-20% Jumbo), closing costs (2-5% of purchase price), and post-close reserves (0 months VA/USDA, 0-6 months PITI on Conv/FHA depending on your file, 6-12 months on Jumbo). On a $600,000 home with 10% down, total savings needed is typically $72,000 to $120,000.

What are mortgage reserves?

Mortgage reserves are the money the underwriter wants to see remaining in your accounts after you close and pay the down payment, closing costs, and prepaids. One month of reserves equals one full monthly mortgage payment (PITIA: principal, interest, taxes, insurance, HOA, mortgage insurance). The GSEs and FHA require reserves so you have a cushion if income stops for a few months.

Do I need cash reserves for a VA loan?

No. The VA does not require cash reserves on a 1-unit primary residence purchase. This is a significant advantage of the VA loan, especially when combined with 0% down and no VA credit-score price adjustments (lender pricing still varies by credit). 3-4 unit VA purchases typically require 6 months of reserves.

What are closing costs on a $600,000 home?

Buyer closing costs on a $600,000 home typically run $12,000 to $30,000 (2-5% of purchase price). The spread covers lender fees, title and escrow, prepaid property tax and insurance, prepaid interest, and third-party items like home inspection. Seller credits (interested-party contributions) can cover most or all of these if the deal allows.

Can I use a 401(k) loan for a down payment?

Yes. You can typically borrow up to 50% of your vested 401(k) balance (max $50,000), with a longer repayment term available for a primary residence purchase. The loan interest goes back to your own account. On conventional loans, 401(k) loan payments do not count against your DTI because the loan is secured by your retirement account. FHA and VA generally treat them the same way.

Can my parents gift me the down payment?

Yes, across every major program. Conventional, FHA, VA, and USDA all allow 100% gift funds for down payment and closing costs on a primary residence. You need a gift letter stating the donor’s name, relationship, exact amount, that no repayment is expected, and donor signature. Document the funds leaving the donor’s account AND arriving in yours.

What is a seller credit?

A seller credit (interested-party contribution) is money the seller agrees to put toward your closing costs. 2026 limits by program: Conventional 3% (LTV > 90%), 6% (LTV 75.01-90%), or 9% (LTV 75% or less); FHA 6%; VA 4%; USDA 6%; conventional investment 2%. On a $600,000 purchase at 10% down, a 3% seller credit is $18,000 — often enough to cover most buyer closing costs.

How long do funds need to be in my account before I apply?

Underwriters pull your two most recent monthly statements. Funds that were in your account for the full 60-day window generally do not need to be sourced. Funds that showed up mid-window usually require a documented explanation. Plan to make any large deposits (gift funds, bonus, car sale) at least 90 days before you apply so they clear the 60-day window on both statements.