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Piti Reserves

Definition - What does Piti Reserves mean?

Piti reserves are reserves of cash that a borrower must have available at his or her disposal upon completion of a down payment on a home, and payment for closing costs. Piti stands for principal, interest, taxes, and insurance. So, piti reserves are reserves of cash that can be used for those purposes.

Justipedia explains Piti Reserves

The purpose of piti reserves are for the borrower to prove to the lender that he or she has enough cash on hand in order to keep paying the mortgage for some time after he or she pays the down payment. Piti reserves act as a sort of insurance for the lender to make sure that the borrower is not broke following the down payment on the house. This decreases the chance of a default. A certain amount of piti reserves are often needed in order to secure the loan in the first place.

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