diff --git a/server/src/com/cloud/deploy/DeploymentPlanningManagerImpl.java b/server/src/com/cloud/deploy/DeploymentPlanningManagerImpl.java
index 57abb9204c4..75bc4b523b0 100644
--- a/server/src/com/cloud/deploy/DeploymentPlanningManagerImpl.java
+++ b/server/src/com/cloud/deploy/DeploymentPlanningManagerImpl.java
@@ -400,10 +400,21 @@ StateListener<State, VirtualMachine.Event, VirtualMachine> {
                                 "memoryOvercommitRatio");
                         Float cpuOvercommitRatio = Float.parseFloat(cluster_detail_cpu.getValue());
                         Float memoryOvercommitRatio = Float.parseFloat(cluster_detail_ram.getValue());
-                        if (_capacityMgr.checkIfHostHasCapacity(host.getId(), cpu_requested, ram_requested, true,
-                                cpuOvercommitRatio, memoryOvercommitRatio, true)
-                                && _capacityMgr.checkIfHostHasCpuCapability(host.getId(), offering.getCpu(),
-                                        offering.getSpeed())) {
+
+                        boolean hostHasCpuCapability, hostHasCapacity = false;
+                        hostHasCpuCapability = _capacityMgr.checkIfHostHasCpuCapability(host.getId(), offering.getCpu(), offering.getSpeed());
+
+                        if (hostHasCpuCapability) {
+                            // first check from reserved capacity
+                            hostHasCapacity = _capacityMgr.checkIfHostHasCapacity(host.getId(), cpu_requested, ram_requested, true, cpuOvercommitRatio, memoryOvercommitRatio, true);
+
+                            // if not reserved, check the free capacity
+                            if (!hostHasCapacity)
+                                hostHasCapacity = _capacityMgr.checkIfHostHasCapacity(host.getId(), cpu_requested, ram_requested, false, cpuOvercommitRatio, memoryOvercommitRatio, true);
+                        }
+
+                        if (hostHasCapacity
+                                && hostHasCpuCapability) {
                             s_logger.debug("The last host of this VM is UP and has enough capacity");
                             s_logger.debug("Now checking for suitable pools under zone: " + host.getDataCenterId()
                                     + ", pod: " + host.getPodId() + ", cluster: " + host.getClusterId());