When applying for a mortgage, reserves is a term that typically means an amount of money that is enough to cover your total monthly mortgage payment (Principal, Interest, Taxes and Insurance) for a specified period of time. For example: if your mortgage lender stated 6 months of reserves were required in order to obtain a mortgage and your total monthly mortgage payment was $1,000/month, then you would be required to have $6,000 put away somewhere, usually in the form of liquid assets.

In some cases during a cash out refinance, the amount of cash you receive at closing may be considered in calculating your total reserves.

Reserves in accounts such as 401K, IRA or other retirement funds are normally accepted at 70% of the value of the account. This is because if you drew money out of those accounts you would pay a penalty of roughly 20-30% and mortgage lenders take that into account when figuring your reserve account amount.

Examples of reserves include:
Savings account balance
CD
401k
Stocks
Bonds
Mutual funds