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: 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.1. Improve Your Credit Score
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. Find A Different Lender
Not all lenders view things in the same way. If a mortgage lender provides a low preapproval amount, then you may decide to fill out another mortgage application with a different lender. In some cases, you may find that switching lenders makes all the difference.
5. Make A Down Payment Of 20%
If you can make a down payment of at least 20% of the total purchase price, you may be approved for a higher loan amount.
That’s because putting down 20% eliminates private mortgage insurance (PMI), which is a cost tacked onto your monthly payments. The lender may increase your preapproval amount without mortgage insurance added to your monthly mortgage.
6. 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 30-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 30-year versus a 15-year term.
7. 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.
8. Find A More Affordable Property
Ultimately, you may not be able to increase your mortgage amount. But that doesn’t mean homeownership isn’t in the cards. Instead, you’ll have to start searching for a more affordable property.
If you aren’t sure how much you can afford, consider using a mortgage calculator to see how the numbers work out. You can play around with the options to find the most affordable option for your situation. If you want to make things even more specific to your situation, check out our home affordability calculator. It will allow you to run the numbers on what home price you can afford right now.
Ready to begin searching for your next home? You can start a new mortgage application with Rocket MortgageⓇ today to see how much home you currently qualify for.
As an expert in personal finance and mortgage matters, I bring a wealth of knowledge and hands-on experience to guide individuals through the intricate process of obtaining a mortgage loan. With a deep understanding of the financial intricacies involved in mortgage approvals, I can provide valuable insights into optimizing your preapproval amount.
The key to unlocking a higher mortgage loan amount lies in a strategic approach that aligns with your financial capabilities. Let's delve into the concepts mentioned in the article and explore ways to enhance your preapproval amount:
1. Improve Your Credit Score:
- Your credit score plays a crucial role in determining your preapproval amount.
- Regularly check your credit report and take steps to improve your score.
- A higher credit score not only increases your preapproval amount but may also lead to a lower interest rate.
2. Generate More Income:
- Increasing your income positively impacts your preapproval amount.
- Explore all potential income sources, including alimony, child support, disability income, VA benefits, and bonuses.
- Providing a comprehensive view of your income can contribute to a higher preapproval.
3. Pay Off Debts:
- Your debt-to-income ratio (DTI) influences your preapproval amount.
- Pay off outstanding debts, such as credit cards or personal loans, to improve your DTI ratio.
- A lower DTI ratio may result in a higher preapproval amount.
4. Find A Different Lender:
- Lenders have varying criteria, and a different lender may offer a higher preapproval.
- If dissatisfied with your initial preapproval, consider applying with another lender to explore different options.
5. Make A Down Payment Of 20%:
- A substantial down payment of at least 20% can increase your preapproval amount.
- It eliminates the need for private mortgage insurance (PMI), reducing monthly costs.
6. Apply For A Longer Loan Term:
- Opting for a longer loan term, like a 30-year mortgage, can result in more affordable monthly payments.
- Lenders may be willing to lend a higher amount with a longer repayment period.
7. Find A Co-Signer:
- While not ideal, a co-signer with a higher income can boost your preapproval amount.
- It involves another party taking responsibility if you fail to meet mortgage payments.
8. Find A More Affordable Property:
- If increasing the mortgage amount proves challenging, consider exploring more affordable property options.
- Utilize mortgage calculators to determine the affordability of different properties.
In conclusion, by strategically addressing credit, income, debts, and property considerations, you can enhance your chances of securing a higher mortgage preapproval amount. Each of these steps requires careful consideration and personalized application to align with your unique financial situation. If you're ready to embark on your homeownership journey, starting a new mortgage application with a reputable service like Rocket MortgageⓇ can provide valuable insights into your current qualification status.
