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 in order to buy a house.
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, Department of Veterans Affairs (VA) benefits, retirement benefits, side hustles, and bonuses. If your household receives any of these types of income, you may be able to include it on your application.
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 – for example, 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 when you take out a conventional loan. The lender may increase your preapproval amount without mortgage insurance added to your monthly mortgage. Keep in mind, that government-backed loans like FHA loans may include mortgage insurance premiums which are cannot be removed with a larger down payment.
6. Apply For A Longer Loan Term
A home 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.
If you make a 20% down payment, you can considerably increase your preapproved amount because a down payment of 20% or more will eliminate the need for mortgage insurance. Without mortgage insurance holding you back, you can allocate more of your income directly toward the loan's principal and interest.
If you make a 20% down payment, you can considerably increase your preapproved amount because a down payment of 20% or more will eliminate the need for mortgage insurance. Without mortgage insurance holding you back, you can allocate more of your income directly toward the loan's principal and interest.
If you really need a big mortgage, like a jumbo loan, you can go with the lender that offers the largest preapproved amount, even if the other aspects of the loan aren't perfect. With more than one offer, you also have the leverage to go back to a lender and see if they'll increase the amount they're willing to lend.
In other words, you can get preapproved for a higher amount if your financial history shows that you have a higher likelihood of making payments consistently and on-time. If you have a less established or less stable financial history, then you will likely have a lower limit on how much you can borrow.
If you demonstrate a history of on time payments in particular ensuring you make at least your minimum monthly payment on time by the due date, your credit card provider might pre-approve you for a higher credit limit. When a lender extends additional credit through a pre-approval, there's usually no hard credit check.
Ask The Lender To Reconsider Your Preapproval Amount
If your personal finances are strong and you think the preapproval amount is too low, you might simply ask the lender if they're willing to take another look.
The answer is yes. You can have multiple pre-approvals at the same time, and in fact, it's often a smart move done by savvy first-time home buyers and real estate investors. There is technically no limit on the number of pre-approvals you can get which makes shopping around with different lenders a no-brainer.
The Takeaway. In most cases, borrowers can't add to an existing personal loan. However, you may be able to apply for a second loan. Eligibility requirements vary by lender, but in some cases you need to have made several consecutive on-time payments before applying for a new loan.
Pre-approval is typically valid for 3-6 months, but it will vary between lenders. Ideally, if you want to move on with a different lender, you'll make the switch before you've got serious about a property. You can typically extend your pre-approval by simply ringing up your bank or mortgage broker.
As well as ensuring your credit score is immaculate and you've paid off any debts, the two most common ways to get a bigger mortgage are to increase how much you put down for a house, or to increase the total income which your mortgage affordability is based on.
If you have an extensive monthly debt burden – for example, 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.
A commitment letter from a lender is prepared by an underwriter after thoroughly looking over the borrower's pre-approval application. This letter is official proof that you're going to get a loan.
Once you're preapproved, or you receive initial mortgage approval from your lender, it's possible to adjust your preapproval amount. Let's take a look at how to increase the mortgage amount you're initially approved for when buying a house, along with how the preapproval process works.
You can't increase your loan amount, but you may be able to apply for a second loan. Technically, there's no limit to how many personal loans you can have. Lenders may approve a second or third loan if the borrower has paid off part of the first loan and has a history of on-time repayment.
When assessing your mortgage application lenders look at how much money you owe already. In general, the more debt you have, the less you'll be able to borrow. If you have savings use them to pay off existing debts.
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