The home-buying journey usually starts with a preapproval. This preapproval not only reflects your seriousness about purchasing a house but also provides clarity about how much you can afford. However, as the home hunt progresses, you might need to increase the preapproved amount.
What is Mortgage Preapproval?
Mortgage preapproval is essentially a promise from the lender that you are likely to qualify for a mortgage, based on your financial situation. This involves a basic application where you submit details about your assets, income, and debts. This is not a guarantee, but a significant step indicating your creditworthiness.
Determining the Preapproval Amount
The preapproval amount is primarily influenced by factors like your credit score, income, debt load, and assets. An appraisal of the property ensures its value justifies the mortgage amount.
Enhancing the Preapproval Amount
If you need to increase the preapproved sum, the following strategies can be employed:
Boost Your Credit Score: A higher score can qualify you for a larger loan by lowering the interest rate. Timely payments and cautious use of available credit can enhance your score.
Present More Income: Besides your primary income, reliable secondary sources like dividends, rental income, or even alimony can be used to reflect a higher earning.
Pay Off Other Debt: A lower debt-to-income ratio can amplify the loan you qualify for. Reducing credit card balances or paying off loans can significantly help.
Increase Down Payment: Putting down at least 20 percent can save you from PMI costs, thus allowing a bigger loan.
Explore Varied Loan Types: While fixed-rate loans offer predictability, adjustable-rate mortgages might provide lower initial rates. If you’re planning to sell or refinance before the rate adjusts, ARMs might be beneficial.
Add a Co-borrower: A co-borrower can enhance the combined income on the application, potentially leading to a higher loan amount.
Accumulate Cash Reserves: Demonstrating financial responsibility by showcasing additional assets can boost lender’s confidence in you.
Ultimately, securing a high preapproval amount requires a combination of strong credit, a stable income, and low debt.
If you aren’t sure how much you can get pre-approved go to our website and fill out our 30 second pre-approval engine.