"Conventional lenders want to see at least two months of the prospective mortgage payment, including principal, interest, taxes and insurance, that will be left as cash reserves after the borrower has paid the down payment and closing costs," Mr. Defngin says. "My preference is to see at least six to even 12 months in reserves. It is better to keep that money in the bank than to spend it on the down payment and closing costs, so if someone comes to me with $20,000 in cash, I suggest they do an FHA loan. That way, they can keep the money available for emergencies and repairs."
While home maintenance and repair costs vary according to the age and condition of the home, Mr. Defngin says consumers should budget 3 percent to 5 percent of their monthly mortgage annually for minor repairs and maintenance.