Lenders want to know that you’ll be able to pay for your housing expenses after the mortgage closes — this is where cash reserves come in handy. Cash reserves are savings measured by the number of months of costs you’d be able to cover.
Expect to need as much as 12 months of mortgage payments in cash reserves. For example, if your new mortgage is $250,000 at a 6.00% APR, your monthly loan payment would be $1,499. This means you’d need about $18,000 in cash reserves. In some cases, you may be able to qualify to keep up to 6% of your unpaid loan balance as a cash reserve instead. New investors may not qualify for a cash-out refinance right away. Typically, you need to wait 60 days after purchasing the property to refinance. However, there is an exception if you paid for the property in an all-cash deal, as long as the source of cash is documented.