One of the crucial steps you must take once you start thinking of how to purchase a home for your family is getting preapproval. Apart from giving you a clear idea of how much you can afford, it also shows the sellers that you are a serious buyer. On the other hand, you might also want to increase your mortgage amount. So this article will show you how to increase your mortgage pre-approval amount and the steps to follow.
What Are The Basics Of Mortgage Preapproval?
Before you go into the details of how to increase your mortgage preapproval amount, you need to have foundational knowledge and an understanding of the basics of mortgage preapproval. A Mortgage pre-approval is the process where lenders have the opportunity to evaluate the applicant’s financial information so as to determine the maximum amount of loan they are willing to give out to you (applicant or buyer).
Some of the important factor that needs to be considered which also influence your pre-approval amount includes employment history, debt-to-income ratio and credit score. If you are able to get a higher pre-approval amount, it can give room for several other advantages such as having greater purchasing power and more flexibility and options in selecting a home.
How To Increase Your Mortgage Pre-approval Amount
The following are the steps you must take to increase your Mortgage pre-approval amount.
You Must Strengthen Your Financial Profile
One of the steps you must take to increase your mortgage pre-approval amount is to strengthen your financial profile which will be significant when you improve your credit score. The first thing you should do is check your credit report if there are errors or discrepancies that could potentially obstruct your credit score. You need to pay your bills on time and reduce credit card balances so that you will have a positive impact on your creditworthiness.
You should not apply for new credit during the period of your preapproval processing. This is because multiple credit inquiries can temporarily lower your credit score.
Another step you can take to strengthen your financial profile is by increasing your income and savings. Look out for opportunities that will help you advance your career or you can consider finding out other side sources of income apart from your main source. When you demonstrate that you have the potential for higher earnings, it shows the buyers that you are a more financially stable borrower when compared to others.
If you are able to save a big amount for your down payment, it will not only reduce the loan amount required but also shows off your ability to manage finances responsibly. Reducing your existing debts and liabilities like paying off outstanding loans can go a long way to improve your debt-to-income ratio which is one of the important factors that lenders consider a lot.
You Can Reduce Your Debt And Improve Debt To Income Ratio
Reducing your debt is one of the steps you can use to increase your mortgage pre-approval amount. You can make a list of your outstanding debts in the order of their priority. This will help you to repay some of the outstanding debts or loans thereby reducing your credit card balances. If you are able to pay off most of your debts with high interest, it can significantly improve your debt-to-income ratio and increase your borrowing capacity. Stop taking new loans or debts during the pre-approval process because it can significantly have a negative impact on your financial standing within the period.
Carefully manage your debt and maintain a healthy debt-to-income ratio and by doing so, you will make yourself stand out as a more favourable candidate to be given a higher preapproval amount.
You Have To Choose The Right Mortgage Lender
Choosing the right mortgage lender is one of the steps you need to take so as to increase your Mortgage Pre-approval amount. Ensure your conduct research where you can compare different lenders so as to know the one that best meets your financial needs. In choosing the right lender, you must consider some factors like interest rates, preapproval criteria and loan program. One of the advantages of working with a broker is that you will have to assess a wide network of lenders which also gives you so many options.
A mortgage broker can always give you a guide on how to go through the pre-approval process and to be able to overcome any problems you may face in the process. Carefully assess the expertise and reputation of your potential lenders to ensure a smooth and efficient preapproval experience.
You Should Provide Accurate And Complete Documentation
When you are looking for a way to increase your mortgage preapproval amount, it is important that you provide accurate and complete documentation to the lender. Have an understanding of the documents they need which may include proof of income, bank statements, identification and tax returns. The lender will only be able to assess your financial situation accurately if you provide accurate and up-to-date information.
Make sure that all the necessary paperwork is organised and readily available. You will make your lenders have more confidence in you and increase your mortgage pre-approval amount when you present a thorough and accurate representation of your finances.
You Can Communicate And Negotiate With Lenders
One of the steps to increase your mortgage pre-approval amount is by maintaining open communication with your lenders, especially throughout the pre-approval processing period. Ensure you communicate to your lenders about your goals, concerns and preferences. If you know your current financial situation you are justified to get a higher pre-approval amount, then quietly inquire if it is possible to negotiate or if there is any alternative option you can use.
Although lenders know that individual circumstances may differ, they may be willing to reassess certain factors or explore different loan programs that best suit your needs. Having a constructive dialogue with your lender can make a way for you to get a better understanding of the options available and potentially lead to an increased preapproval amount.
One of the major ways to increase your mortgage pre-approval amount is by using a proactive approach and also paying attention to some key factors. Some of the steps you need to take are to reduce your debt, engage in open communication with your lenders, provide accurate documentation, strengthen your financial profile etc.
All the steps discussed above offer valuable steps to enhance your financial standing and increase your borrowing capacity. When you get a higher preapproval amount, you will gain more flexibility in your home search and a greater chance of turning your homeownership dreams into a reality.
Frequently Asked Questions
Can I Increase My Preapproval Amount If I Have A Low Credit Score?
A low credit score may affect your preapproval amount negatively but it doesn’t mean you will be unable to increase it. You can start the process of increasing your mortgage preapproval amount by reviewing your credit report for errors and addressing any discrepancies. Concentrate on how to improve your credit score by paying your bills on time, reducing your credit card balances and trying to avoid obtaining new credit applications. When you show that you have responsible credit behaviour over time, your credit score can be raised which will in turn help you to qualify to get a higher preapproval amount.
Is It Necessary To Save For A Larger Down Payment To Increase My Preapproval Amount?
It is not compulsory that you must save for a down payment, but it can also affect your preapproval amount. Having a larger down payment amount will help to reduce the loan amount required and in turn, increase your borrowing capacity and potentially help you to get a higher preapproval amount. Moreso, it is important to strike a balance between saving for a down payment and managing other financial obligations. Have a close relationship with a lender or mortgage professional so that you can explore the various down payment options available and also determine the best approach you can use based on your specific financial circumstances.