What is the reserve requirement for purchasing a four-family duplex?

The reserve requirement for purchasing a four-family duplex is established to ensure that homeowners have sufficient financial resources to cover potential financial obligations, such as mortgage payments, in the event of unexpected circumstances like job loss or other financial hardships. A reserve requirement of six months means that the borrower must have enough funds set aside to cover six months' worth of mortgage payments, taxes, insurance, and other associated costs.

This requirement is particularly important for multi-family properties, such as duplexes, because they can come with added complexities and responsibilities. Having a substantial reserve can provide a cushion that helps borrowers maintain their mortgage commitments, thus reducing the risk of default. Lenders often impose higher reserve requirements for these types of properties compared to single-family homes due to the increased risks perceived in multi-family investments.

By requiring six months of reserves, lenders aim to promote financial stability for the borrower, and this aligns with prudent lending practices. Such requirements are designed to safeguard both the borrower and the lender, ensuring that the borrower is adequately prepared for future obligations and that the lender mitigates risks associated with financing these properties.