The Quick Read: You document these reserves by giving the lender complete, recent account statements, showing the vested balance for retirement money, so the underwriter can count what is left after your down payment and closing costs toward the months of payments (principal, interest, taxes, insurance, and association dues, called PITIA) the program requires.
- Retirement and brokerage balances usually count without being sold or withdrawn, subject to lender guidelines.
- Only the vested portion of a 401(k) counts, and some programs credit less than the full balance.
- Reserves are tested after cash to close, so a bigger down payment shrinks your cushion.
- Money moved between accounts late in the process triggers extra sourcing paperwork.
- Treatment differs from lender to lender, so ask what counts before you rely on an account.
What Reserves Mean in a DSCR File
Reserves are liquid assets you still hold after the loan closes. The lender wants proof you can keep paying the mortgage if rent stops for a few months. They are counted in months of PITIA on the subject property.
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DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. That does not mean the file is asset-free. Credit, down payment, and reserves are still reviewed, and every account gets documented.
Across the wholesale network of lenders Lendmire works with, reserves vary by lender, leverage, loan size, and transaction type. About 6 months of PITIA is a common requirement. Conservative rate-and-term refinances at modest leverage under $1,500,000 can see reserves waived. Loans above that size typically step up to about 9 months. Coverage below 1.00 is a separate select-lender path, with leverage and terms adjusted, and reserve requirements there can run higher.
One more point keeps expectations honest. DSCR compares rent to PITIA only. Clearing 1.00 does not mean the property produces positive cash flow, because repairs, vacancy, management, utilities, and capex sit outside that calculation. Reserves are what protect you from those gaps.
How Underwriting Treats Retirement and Brokerage Money, Step by Step
Underwriters follow the same sequence on almost every file. Knowing it lets you prepare in the right order. These are the steps.
1. Size the requirement. The lender sets a number of months of PITIA based on deal risk. Larger loans, lower coverage ratios, and short-term rentals can raise it.
2. Subtract funds to close. Your down payment and closing costs leave the pool. On an investment-property purchase, most files land at 75%-80% LTV, so the down payment is a meaningful draw.
3. Pull the statements. Brokerage files typically want the most recent two consecutive monthly statements. Retirement files want the full statement showing the vested balance.
4. Apply the program’s credit factor. The underwriter multiplies each asset by the percentage the program allows, then adds the results. Some programs credit vested retirement money at full value. Others credit only part of it.
5. Check titling. The account should belong to the borrower or guarantor. When an LLC is the borrower, personal accounts of the guarantor generally still work, depending on program guidelines.
6. Screen for recent deposits. Large transfers into checking shortly before closing trigger sourcing. Leaving assets where they sit avoids most of that.
The result is a usable-reserves number. It is almost always lower than the sum of your statement balances.
Which Document Goes With Which Account
Each account type has one core document and one common way it gets rejected. This table is a planning tool, and the lender’s condition list controls what you actually submit.
| Account | Core document | Must show | Common rejection |
|---|---|---|---|
| Checking/savings | Recent monthly statements | Name, account number, balance | Missing pages |
| Taxable brokerage | Two consecutive statements | Holdings, value, titling | Stale or partial statement |
| 401(k) | Full plan statement | Vested balance, loans | Total balance only |
| IRA | Custodian statement | Balance, owner | Summary page only |
| Business account | Statements plus access proof | Ownership, unfettered access | No ownership evidence |
Every statement should include all pages, even blank ones. Screenshots and summary dashboards are a common cause of a repeat request.
How to Document a 401(k)
Start with the full plan statement, not the login page balance. Underwriters need the vested balance, because unvested employer match money does not count. Find the line that separates vested from total. If your statement shows only a total, ask the plan administrator for a vested balance report.
Next, look for outstanding plan loans. A loan against the account reduces the countable balance, and the statement should show it. Then confirm access. Some plans restrict withdrawals while you are still employed, so a lender may ask for plan terms or a letter showing the funds are reachable.
You generally do not have to withdraw anything to count retirement funds as reserves. Funds you need for the down payment or closing costs are different. Those may need to be shown as accessible or moved into checking, which creates a sourcing trail.
Lenders discount retirement money because pulling it out early is expensive. The IRS notes that certain early distributions carry a 10% additional tax, and early generally means before age 59½. The same early-distribution rules extend to IRAs, which are covered in IRS Topic 557. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
For a jumbo-sized version of this problem, Lendmire has a piece How to Document Jumbo Cash-Out Reserves From a 401k as a W-2 Earner. The statement logic is the same.
How to Document a Brokerage Account
A taxable brokerage account is usually the easier asset to document. It has no vesting question and no plan access rules. The underwriter still looks at several details.
- Statement dating. The statement should be the most recent period, and a second consecutive month shows the balance did not appear overnight.
- Holdings type. Cash sweep balances, money market funds, and listed securities are viewed differently from each other. Stocks and funds move with the market, so many programs credit them below face value.
- Titling. The account should be in the borrower’s name. Jointly held funds are generally treated as the borrower’s own.
- Margin and pledged holdings. If securities are pledged against a margin loan or another debt, the countable value falls.
- Market movement. If the balance drops between the statement and closing, the underwriter may ask for an updated statement and re-run the numbers.
Some lenders also ask for a statement-of-value letter from the institution. That happens when the statement is hard to read or the holdings are unusual. It is a request you can usually cure with one call to the custodian.
Moving Money Between Accounts
Moving money creates paperwork. A deposit into checking that does not match your normal pattern gets questioned. The underwriter then wants the statement from the source account and the statement from the receiving account, so the transfer trail is visible.
The cleanest approach is not to move reserve money at all. Leave the brokerage or retirement balance in place and let the statements do the work. Move only the funds you need for cash to close, and move them well before you apply.
If a sourcing condition does arrive, write a short, plain letter of explanation. Say what the funds were, where they came from, and which statements prove it. Keep it factual. Skip the story, because the statements carry the proof and the letter only points to them.
Some borrowers sell investments to make the numbers look cleaner. That usually backfires. Liquidation adds a sale confirmation to the file and can change the credit the lender gives the asset.
For files that mix several asset types, Lendmire’s piece How to Document Retirement and Brokerage Reserves for a Jumbo Cash-Out shows how a lender sorts them.
A Stacked Example in Months, Not Dollars
Run the numbers on a modeled purchase where the program asks for 6 months of PITIA. These are illustrative assumptions, not program figures. Balances are expressed as months of PITIA so no payment dollar is needed.
| Asset after cash to close | Statement value | Credited value |
|---|---|---|
| Checking | 1 month | 1 month |
| Brokerage | 2 months | 2 months |
| Vested 401(k) | 4 months | 4 months |
| Total | 7 months | 7 months |
If the program credits vested retirement money at full value, the file clears 6 months with a cushion. Now say the lender credits only half of the vested 401(k) balance. That line drops to 2 months, and the total falls to 5 months. The file is one month short.
The statement total never changed. Only the credit factor did. That gap between statement balance and usable reserves is where most surprises come from.
The fix is usually simple. A shortfall can often be cured by adding assets earlier, putting more of the closing funds elsewhere, or choosing a program with more favorable credit factors. A larger down payment lowers the monthly payment and can lift the DSCR, but it also shrinks reserves. The strongest files clear both tests: enough rental coverage and enough post-closing cash.
Where the General Rule Breaks
The steps above hold for most files. These edge cases are where they stop working.
Plans that restrict access. Some 401(k) plans do not allow withdrawals while you are employed. A lender may ask for proof of access or decline to count the account. Some lenders do not accept retirement assets at all, so ask early.
Unvested and restricted assets. Unvested employer match, unvested restricted stock units, and stock options do not count. If your net worth sits in employer equity, expect little credit for it.
Outstanding plan loans. A loan against the 401(k) reduces the countable balance. The statement should show it, and the underwriter will subtract it.
Roth accounts. The tax side of a Roth differs from a traditional account. Lenders treat Roth balances program by program, so do not assume a better or worse credit factor.
Gift funds. Gift money is generally not allowed for reserves in many programs. It may be allowed toward cash to close under some guidelines.
Business accounts and crypto. Business funds usually need proof of ownership and unfettered access. Crypto and wire receipts without statements are commonly rejected.
Cash-out refinances. Some programs let cash-out proceeds count toward reserves, and others do not. Cash-out tops out around 75% LTV across most of the network, and the reserve rules are set by the lender, not the transaction type alone. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Ineligible property types. Reserves cannot fix a property the program does not offer. Manufactured homes, log homes, and barndominiums are not offered through these DSCR programs, no matter how strong the reserves are.
Experience from reviewing many files shows a pattern. Borrowers with most of their net worth in retirement accounts often assume they are short on reserves, when the real problem is paperwork. The file stalls because the statement shows a total balance and not a vested one, or because one page is missing. The strongest files arrive with the vested balance already highlighted and any plan loans disclosed up front.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
What the Decision Looks Like in Practice
The decision is rarely whether to use the account. It is whether to leave the money in place and document it, or move it and manage the trail. Leaving it in place is usually cleaner. Moving it makes sense only when the lender requires proof of liquidity for closing funds.
Gather documents in the order the file needs them.
- Before you apply: Pull the latest brokerage statements and the full 401(k) statement with the vested balance. Ask the plan about access rules.
- At contract: Total your cash to close and subtract it from your assets. Confirm the usable number with your broker.
- In underwriting: Respond to each condition with the exact statement the underwriter named. Refresh any statement that has gone out of date.
A short list of questions to ask the lender or broker saves time later.
- Does this program count retirement assets, and at what credit factor?
- Do you need the vested balance shown separately?
- Are statements for a business or entity account treated differently?
- Do reserves change if my coverage ratio is below 1.00?
- Can cash-out proceeds count toward reserves?
Because treatment varies across lenders, the most useful step is comparing programs, not guessing at a single rule. The complete DSCR loans guide shows how reserves fit into the rest of the file.
Key Terms Defined
Reserves: Liquid assets you still hold after closing, measured in months of PITIA.
Vested balance: The part of a retirement account that is legally yours, which excludes unvested employer match.
Credit factor: The percentage of an asset’s value the lender counts toward reserves, sometimes called a haircut.
Sourcing: The paper trail showing where a deposit came from, usually two statements that show the transfer.
Guarantor: The person who personally backs a loan when an LLC is the borrower, subject to program terms.
Frequently Asked Questions
Do I have to withdraw my 401(k) to count it as reserves?
Generally no. Most programs accept the account where it sits, supported by statements showing the vested balance. Funds you need for the down payment or closing costs are different, because they may need to be shown as accessible or moved into checking.
Does a Roth IRA work differently from a traditional IRA?
It can, but the treatment depends on the program, not on a universal rule. Provide the custodian statement showing the balance and owner, and ask whether the lender applies a different credit factor.
Can I count the amount I could borrow from my 401(k)?
Some lenders consider borrowable balance, and others do not. Where it is considered, they want plan documents supporting the amount. An existing plan loan, by contrast, reduces what counts.
What if my brokerage balance drops before closing?
The underwriter can ask for an updated statement and recalculate usable reserves. A cushion of extra months protects you from normal market movement. If the drop creates a shortfall, adding assets or cash fixes it.
What if the funds came from a recent transfer?
Expect a sourcing condition. Provide statements from both accounts showing the money leaving one and arriving in the other, plus a short letter of explanation if requested.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. IRS Topic No. 558, Additional Tax on Early Distributions from Retirement Plans
2. IRS Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Fixed vs ARM on a DSCR Loan: Which to Choose · No-Ratio DSCR Loan vs Profit and Loss Only Loan · How to Get a DSCR Loan With Only Three Months of Rental History
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.