With the rising cost of homes in the current market, many prospective buyers are searching for ways to get approved for a higher mortgage loan. Luckily, there are a number of ways to raise your loan amount so you can get the home of your dreams! If you are hoping to purchase a home in the near future, check out these tips to help you get approved for a higher loan.
Pay Off Debts
An important factor contributing to your mortgage loan amount is your debt-to-income ratio, which is a ratio that measures the amount of monthly income spent on minimum monthly debt payments. Paying off some of this existing debt before applying for a mortgage loan allows you to have more available monthly income to go toward a home.
Improve Your Credit
Raising your credit score before you start your homebuying journey can also help you qualify for a higher mortgage loan. When purchasing a home, credit influences a buyer’s interest rate. Therefore, better credit can help you get a better rate. To build your credit, ensure you make payments on time each month, avoid maxing out your credit cards, and don’t apply for more credit while applying for a mortgage.
Make A Higher Down Payment
Making a higher down payment can increase your borrowing power in two ways. First, a higher down payment decreases the amount of the loan. If you want to purchase a more expensive home, you can bridge the gap of approval by covering the extra cost in the down payment, therefore keeping the same loan amount. Second, putting down at least 20% of the home’s price will allow you to save on Private Mortgage Insurance (PMI) that protects your lender. By paying off 20% of the home upfront, you can increase the amount of loan you are eligible for.
Generate More Income
Generating more income may be easier than you think. If you have reliable sources of regular income, it can likely be considered as additional income and increase the loan amount you are approved for. Reliable sources of income can include alimony, child support, rental property income, interest or dividends from investments, funds from a side gig or part-time job, and more.
Add A Co-Borrower
A lender will likely give you a higher mortgage loan approval amount if you add a co-borrower. An ideal co-borrower has good credit and a reliable source of income. Additional income from a co-borrower means more can be paid each month for the loan, which increases the likelihood that a lender will approve a higher loan amount.
As you prepare for your upcoming home purchase, make sure to get in touch with the experts at Coastal Custom Mortgage. Coastal Custom Mortgage is committed to working closely with clients to provide customized mortgage loan plans and competitive rates. Our team of lenders is here to help you walk through the home-buying process with confidence.