If your goal is to purchase a home within the next year, now is the right time to start preparing. There are three factors used to determine your mortgage qualification. Awareness of these three factors can truly help improve your financial security when buying a home and increase the strength of your mortgage qualification.  The third step is:


Funds to Close

Once you have reviewed your credit report and calculated your debt-to-income ratio, now we need to look at how much money is needed to purchase a home. There is more to a home purchase than just the down payment. All together, the total dollar amount you must save up for to purchase a home is called funds-to-close.

1. Closing Costs: The total of all items that must be paid at closing related to your new mortgage.

Lender Fees:  Lenders charge an origination fee which can be a percentage of the loan amount or fixed dollar amount. Verity’s origination fee is 1% of the loan amount plus $495 (minimum of $1,495 and maximum of $4,495). Required services include appraisals and title insurance.

Discount points: Discount points are fees collected by the lender in exchange for a lower interest rate. Each discount point is equal to 1% of the loan amount. It is through discount points that borrowers can “buy down” their interest rates.

2. Escrow* Deposit and Pre-Paids: Depending on the month your loan closes, between 2 and 7 months of taxes and insurance premiums are deposited into an escrow account at closing. Pre-paids are the daily interest charges for the number of days left in the month that your loan closes. For example, if your loan closes on the 20th, you would pre-pay 10 days of interest.

3. Reserves: Reserves are assets you must have but do not use during the purchase of your home. Assets can include checking or saving balances, vested amounts in retirement accounts as well as stocks and bonds.  If your full mortgage payment (PITI – principal, interest, taxes and insurance) is $2,000 and your loan requires three months of reserves, you must have $6,000 in reserve assets after closing.

Not every loan program requires reserves.

To apply for a mortgage loan, you can visit Verity Credit Union’s Online Real Estate Center. If you would like to speak with a financial services specialist to discuss your debt-to-income ratio, your credit scores or strategies on how to reduce your closing costs and down payment requirements, you can call 206-361-5320 or email mortgages@veritycu.com.

*An escrow account is used to collect and hold funds to pay your property taxes and required insurances. Some loans are required to include an escrow account depending on loan-to-value and borrower’s credit score.
Jeremy Sankwich

Hello, I’m Jeremy – I manage the business development efforts for Verity’s mortgage department.  My passion is in helping Verity members down the path to financial freedom and home ownership. I try to go beyond the mortgage loan when helping members as I discuss real estate and financial education.

I have a degree in financial services and financial management from California State University.  I currently live in Auburn, WA with my wife and baby on the way.

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