LendingClub to the rescue or nah?

[Earl Jornales]

So if I got an IRA and set that up with the max contribution for the year, would lenders be able to consider the money in that IRA as the necessary requirement of having 3 times the mortgage value post-closing? I don't really have IRA and I can sense some people are already shaking their heads at that. I've been told that I need money 3 times the mortgage left over in order for the lenders to feel good about the mortgage.

I'm considering crowdfunding some money from lendingclub to create a Roth IRA and max that up for the year. I've seen a few posts around Prosper and LendingClub being okay for investment purposes, but they might have been old and are people not using it this way? It will likely create a dent to my excellent credit score, which I can probably repair by October or December. My goal is to have the ability to pounce on my first investment opportunity should I see it. What sounds good for this situation?

[Stephen Chittenden]

The reserve requirements, which is what you are discussing, are based on the monthly mortgage payment. These requirements vary from lender-to-lender, although for small multi family resident (4-units or less) and single-family, many lenders will use the Fannie Mae and Freddie Mac requirements as they plan to resell the mortgage. Other lenders who will hold and service the note in-house may be more flexible. The requirements have historically been measured in terms of months of reserves and varied from 0-6 months depending upon credit, down payment, and other factors. They are moving now to a percentage of the mortgage value as opposed to months, but the amounts are low--only a few percent at most. You can search the Internet for Fannie Mae reserve requirements to find more specific information.

FYI, they generally will include 60% of an IRA balance for purposes of the reserve calculation. Also, you cannot contribute more than your earnings to an IRA, so I'm not sure why you would want to borrow money to fund an IRA. This is especially true given the relatively low IRA contribution limits.