You are required to have at least 3.5% of the purchase price in your account in order to qualify. The bank does have to confirm that you have the 3.5% in cash available, but your bottom line to bring to the table will not be the full 3.5%. Because of the tax proration on the closing statement, you will receive a credit from the seller for a full year of taxes, so your cash at closing amount will not be the full 3.5%. Any amounts that you prepay, such as the home inspection or loan application fee, will be credited against the amount due at closing. Most lenders and insurance companies in this area allow the homeowners insurance premium to be paid on the closing statement.
Please consult a local real estate professional to make sure you get the best advice. I'll be happy to help you.