The Quick Read: A brokerage account is usually the cleaner reserve asset, because the cash is reachable without a penalty and lenders tend to credit it at or near full value. A retirement account can still count, but programs commonly discount the vested balance, so the same dollar amount covers less of the requirement.
- Reserves on most files in the wholesale network run about 6 months of PITIA, and about 9 months on loans above $1,500,000, subject to lender guidelines.
- Brokerage statements generally count at or near full market value.
- Retirement statements generally count at a discount, based on the vested balance only.
- Counting an account as reserves is not the same as withdrawing from it.
- Reserves are one test. Credit, leverage, and rental coverage still have to clear.
The honest answer on who each is for: a brokerage account suits the investor who wants the simplest documentation and the least math. A retirement account suits the investor who has the balance but not the liquid cash, and wants to qualify without selling anything or paying early-withdrawal tax. Most borrowers with both should lead with brokerage and use retirement funds to fill the gap.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
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Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 29, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Lendmire is a broker. It arranges DSCR financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Each lender sets its own asset treatment, so the figures below are ranges, not promises. The complete DSCR loans guide covers the full program picture.
Side-by-Side
The table below describes published industry norms for how reserve assets are treated, not a fixed rule for any one program.
| Factor | Brokerage Account | Retirement Account |
|---|---|---|
| Typical credit toward reserves | Full or near-full value | A discount on vested balance |
| Balance counted | Market value on statement | Vested balance only |
| Documentation | Recent statement, name and account number | Recent statement showing vested balance |
| Plan loans | Not applicable | Usually netted out |
| Must you liquidate? | Usually no | Often no, program-specific |
| Cost if you do sell or withdraw | Capital gains tax | Income tax, plus 10% early tax if under 59½ |
| Ownership | Borrower’s name | Borrower’s name |
| Entity loans | Guarantor’s personal account generally evaluated | Same |
Treat the “typical credit” row as directional. Treatment varies by lender, and a few programs apply different percentages to Roth balances. Confirm the exact percentage against the lender’s guideline before building a reserve plan on it.
Why Lenders Treat the Two Differently
Liquidity and tax friction explain the gap. A brokerage balance can be sold and settled without any age restriction. A lender looking at that statement sees cash that is nearly reachable.
A retirement balance is different. The IRS describes a 10% additional tax on early IRA distributions taken before age 59½, unless an exception applies. Ordinary income tax can stack on top. A balance that costs a meaningful slice to reach is worth less as a safety cushion, so programs apply a haircut. That haircut is a credit-policy choice by each lender. It is not a federal rule.
Treat that as context only. Within Lendmire’s network, the percentages come from each lender’s guidelines, and your loan officer confirms them file by file.
How the Reserve Math Works on a Refinance
Reserves are measured in months of PITIA, meaning principal, interest, taxes, insurance, and any association dues on the subject property. On most files in the network that lands around 6 months. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived. Larger loans step up to about 9 months. These vary by lender, leverage, loan size, and transaction type, so never plan around a single number.
The sequence on a file runs like this:
1. Set the requirement. The lender grid fixes the months of PITIA based on loan size, leverage, and transaction type.
2. Subtract committed funds. Payoff costs, closing costs, and any cash required at closing come out first. What remains is available for reserves.
3. Document each account. Brokerage needs a statement with the owner’s name, institution, account number, and market value. Retirement needs the vested balance, with any plan loan netted out.
4. Apply the discount. The underwriter takes the eligible share of each balance and compares the total to the requirement.
5. Confirm ownership. The account generally has to sit in the borrower’s name. On an entity loan, the guarantor’s personal accounts are typically the ones reviewed, subject to program terms.
Here is a worked comparison using percentages only. Picture two borrowers who each hold the same headline balance, one entirely in a brokerage account and one entirely in a traditional IRA. If the lender credits the brokerage account at full value and the IRA at a discount, the IRA borrower falls short of the same requirement while holding the same total wealth. The fix is not complicated: shift the documented mix, add a different asset, or reduce what the file needs.
When a Brokerage Account Is the Better Fit
A brokerage account is the stronger choice in four situations.
You are close to the requirement. Because brokerage value generally counts at or near full, it closes a small gap with less cushion needed. Document it first.
You want the simplest file. One recent statement showing the market value is usually enough. There is no vested-balance question and no plan-loan netting.
You are over-weighted in retirement money. The investor who holds most wealth in a 401(k) often finds the discount bites. Even a modest brokerage balance can change the picture.
Selling is not required. If the statement value is enough, no sale happens, so no capital gains tax is triggered. That only changes if you actually liquidate. The IRS holding-period rule in Topic 409 separates short-term from long-term gains, and the wash-sale rule applies if you sell at a loss and repurchase substantially identical stock within a short window around the sale.
The catch with brokerage accounts is valuation. Market value moves. A statement dated before a drawdown can overstate what the file will carry at review, so the cushion above the requirement matters more here than on a stable balance.
When a Retirement Account Is the Better Fit
A retirement account is the better fit when it is the only large pool you have, or when you want to keep tax-advantaged compounding intact.
You do not want to sell anything. Many programs count retirement funds without requiring withdrawal. That preserves the account and avoids the tax cost the IRS describes. The program guideline decides, so confirm it.
Your wealth is mostly in 401(k) or IRA balances. Then the discounted balance may still clear the requirement, especially on a rate-and-term file at modest leverage where reserves may be waived or reduced.
You are older than 59½. The 10% additional tax no longer applies, though ordinary income tax still does on traditional balances. Whether a program treats that differently is program-specific.
The friction points are specific. Use the vested balance, not the headline total. Net out any outstanding 401(k) loan. Do not assume a hardship provision erases the penalty; Kiplinger reports there is no general hardship exception to the 10% tax. And Roth accounts carry no uniform rule, so treat Roth treatment as lender-specific.
For deeper detail on this single question, Lendmire’s piece Does a Retirement Account Count as Reserves on a DSCR Refinance? walks through the documentation. On the brokerage side, see its article Does a Retirement or Brokerage Account Count as DSCR Reserves?.
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.
Using Both Together
Most investors with both account types should not choose. Document brokerage assets first at full credit. Then add retirement funds at their discounted value to cover the remainder. That order uses the strongest asset where it counts most and leaves tax-advantaged money working.
A few cautions apply:
- Do not double count. Funds earmarked for closing costs or cash to close cannot also serve as reserves.
- Do not move money late. Large transfers near the review date invite sourcing questions. Seasoning requirements differ by lender.
- Do not rely on a stock-to-rental 1031 exchange. Stock is not like-kind property for that purpose, so selling holdings to fund a rental is a taxable event.
Reserves are one of several tests. Clearing 1.00 coverage, where select programs start, says nothing about repairs, vacancy, or management costs. A larger down payment can lift coverage, but it never erases credit floors, leverage caps, or reserve rules. Credit floors begin at 620 in parts of the network, most programs want about 660, and 700 or higher unlocks the strongest tiers. Cash-out refinances top out around 75% LTV on standard investment property.
Key Terms Defined
Reserves: liquid or near-liquid assets left after closing, measured in months of PITIA.
PITIA: principal, interest, taxes, insurance, and any association dues on the subject property.
Vested balance: the part of a retirement account the borrower owns outright and can keep if they leave the plan.
Haircut: the percentage a lender subtracts from an asset’s stated value when counting it.
Seasoning: the period funds must sit in an account before a lender treats them as the borrower’s own.
Balanced Verdict
Brokerage wins on simplicity and credit. Retirement wins on preservation. Neither is universally better; the better one is whichever gets your file over the requirement without a tax bill you did not plan for. Lead with brokerage, backfill with retirement, and confirm the exact discount before you build the plan. Tax treatment varies; consult a qualified professional before relying on any tax outcome.
Frequently Asked Questions
Can I count a 401(k) as reserves without cashing it out?
Often yes. Many programs count the vested balance at a discount without requiring you to withdraw it. Some require liquidation, which turns the tax cost into a real cash cost, so confirm with the specific lender guideline before assuming.
Does the full balance of my IRA count?
Usually not. Programs commonly apply a percentage to the vested balance, so the credited amount is lower than the statement total. Market surveys report a wide band of discounts, and the figure for your file depends on the lender.
Is a brokerage account always credited at full value?
Not always. Many programs credit it at or near full market value, but some apply a modest discount, and funds set aside for closing cannot be counted twice. Lenders may also look at how recent the statement is.
Do reserves apply the same way on a cash-out versus a rate-and-term refinance?
No. Reserve expectations differ by transaction type, leverage, and loan size. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, while larger loans step up to about 9 months. Cash-out files carry a lower leverage ceiling of around 75% LTV on standard rentals. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
What if my loan closes in an LLC?
The guarantor’s personal accounts are generally the ones reviewed, subject to program terms. The account usually needs to sit in the guarantor’s own name, so check how your assets are titled before the file goes in.
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.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS Topic 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
2. IRS Topic 409, Capital Gains and Losses
3. Kiplinger: Penalties on Early IRA and 401(k) Payouts
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a W-2 Employee Get a DSCR Loan on a Rental? · Can You Use Delayed Financing for a DSCR Refinance? · Can You Refinance a Rental With a DSCR Loan and No Tax Returns?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.