Buying a house is a major financial commitment. Striking the right balance between the dreams you have for your future home with the reality of your monthly mortgage payment can take some time. But without the right mortgage preapproval amount, it can be even more challenging to find the perfect fit.
If it makes sense for your finances, increasing your mortgage preapproval amount might be possible. Let’s dive into how to increase your mortgage preapproval amount for a smoother home search.
What Is A Mortgage Preapproval?
A mortgage preapproval is a process that determines how much money you can borrow for your home purchase. Before a lender grants a preapproval, it will look at your complete financial picture, including information about your income, assets and credit score. To do this, you’ll need to submit specific documents that are required by your lender as proof that you can afford the loan’s monthly payments.
What the lender finds on its deep dive into your personal finances will impact the preapproval amount it grants you. Beyond how much you can borrow, your preapproval typically includes information about what your interest rate might be.
Can You Increase Your Preapproval Amount?
The amount you are preapproved for is not necessarily the final maximum you can afford on your home purchase. If you think that your finances can handle more mortgage, you can take action to increase your mortgage preapproval amount. Here’s how:
- Improve your credit score
- Generate more income
- Pay off debts
- Apply for a longer loan term
- Find a Co-Signer
Tips To Help You Get Approved For A Higher Mortgage Loan
If you aren’t satisfied with your initial preapproval amount, you can take steps to possibly unlock a higher mortgage loan amount.
Before you jump into increasing your mortgage loan amount, consider whether you can truly afford the bigger payments. Take the time to realistically assess your budget before attempting to increase your preapproval amount.
If you decide that a larger preapproval amount is the right move for your finances, you have several ways to give that amount a boost. Consider these actionable steps to get approved for a higher mortgage loan:
1. Improve Your Credit Score
A good first step is to look at your credit report. If you already have a great credit score, you can’t do much to raise it significantly. But if you have a credit score that could stand some improvement, then take action.
When you improve your credit score, a lender may be willing to increase your preapproval amount. Additionally, a higher credit score may be able to lower your interest rate.
2. Generate More Income
A bigger income can lead to a larger preapproval amount. That’s because you’ll be able to handle a larger mortgage payment with more money coming in every month.
Of course, generating more income can be easier said than done, so it pays to think through all of your income sources. Chances are that you only included your W-2 income on your application. But you can go back to include other sources of income.
A few easily overlooked sources of income include alimony, child support, disability income, VA benefits, retirement benefits, side hustles, and bonuses. If your household receives compensation in any way, you may be able to include that income on your application.
3. Pay Off Debts
When determining how much you can borrow, a lender will compare your monthly debt payments to your gross monthly income to determine your debt-to-income ratio (DTI). If you have an extensive monthly debt burden – i.e., a high DTI ratio – your preapproval amount will be lower. But if you can eliminate some of these debts – such as credit cards or personal loans – from your books, then a lender may be willing to increase your preapproval amount.
4. Apply For A Longer Loan Term
A loan with a longer term allows you to stretch out your mortgage balance over more payments. In most cases, a longer term – such as a 20-year fixed-rate mortgage – will calculate into more affordable monthly payments. As a result, a lender may be willing to lend you more if the loan is set for a 20-year versus a 15-year term.
5. Find A Co-Signer
Closing a mortgage with a co-signer is typically not ideal for the co-signer. Although you’d be living in the house, their assets would be on the line if you couldn’t keep up with your mortgage payments. As such, it can be challenging to find a willing co-signer.
While it may be difficult to lock down a co-signer, if you can recruit a willing family member or friend with a high enough income, then you may be able to give your preapproval amount a boost.
Begin your mortgage application with a team of trusted mortgage advisors
If you want to begin your mortgage application process, choose Capital Zone Mortgage Brokers. We are a team of trusted mortgage advisors and we will guide you every step of the way.
Contact Us Now – +971 45 47 1111
