6 months' worth of mortgage payments saved up to be approved?

[David Ingram]

Hi all! I have listened to BP Podcasts, read about 4 books from Brandon Turner and I'm getting my ducks in a row before I pull the trigger and finance my first long term rental. Talking with a lender I may want to go with he advised me that for a conventional loan, or any loan for that matter that it would be a good idea for the underwriters to see that I have 6 months worth of mortgage payments saved up in-order to be approved for a loan. It doesn't have to be liquid, it can be IRA, 401K etc and that will work. I am W-2 and I pay full mortgage for my regular live in house. There is NO way I could have 6 months' worth of mortgage saved up to finance another house.

FIrst, is this true what I am being told? 

Is it true even if I have a private or hard money lender to finance my down payment?

Any work around?, should I wholesale to stack my bank account before trying to get financed for a loan?

Thank you all for your time. 

[Leo R.]

@David Ingram that's not required by all lenders (in fact, I've never had a lender ask for this), but it might be required of some lenders...and it's possible more lenders are requiring it these days, since many are tightening their underwriting requirements. ..whether or not lenders require it may also depend on the borrower's overall financial picture and DTI (I'd suggest asking your mortgage broker whether they require this of all borrowers, or just in certain circumstances).

Also keep in mind that not all lenders/mortgage brokers are the same--if you go around to multiple mortgage brokers, they may give you different qualification amounts, different terms, different underwriting requirements, etc. --so it's worth shopping around.

Lastly, an overall suggestion--whenever a mortgage broker tells you something like this, it's always worth asking them follow-up questions like "is this a universal requirement?" "is there anything I could do to get different terms?", etc, etc.....most mortgage brokers are happy to explain these issues to you, and help you understand why you're being quoted certain terms--and what you could do to get different terms...I've had many long conversations with my mortgage broker about these types of issues, and I always walk away with a better understanding of my own financial picture, how the banks operate, what I need to do financially to qualify for what I need, etc., etc. --it's free (and valuable) education.

Good luck out there!