If you’re in the market for a new home, you’re probably thinking about applying for a mortgage. But did you know that your preapproval amount isn’t set in stone? There are things you can do to increase your preapproval amount and potentially afford a more expensive home. In this article, we’ll give you tips on how to increase your mortgage preapproval amount.
1. Understand Your Credit Score
Your credit score is a crucial factor in determining your preapproval amount. Lenders look at your credit score to determine how likely you are to repay your mortgage. If you have a low credit score, your preapproval amount might be lower than what you need.
If you want to increase your preapproval amount, you should start by understanding your credit score. Check your credit report for any errors and fix them. Pay off any outstanding debts and make sure you pay your bills on time. The higher your credit score, the higher your preapproval amount will be.
2. Increase Your Income
Lenders want to make sure you have enough income to repay your mortgage. If you’re not earning enough, your preapproval amount might be lower than what you need. To increase your preapproval amount, you can try to increase your income.
You can ask for a raise at work, look for a higher-paying job, or start a side hustle. Any extra income can help you qualify for a higher preapproval amount.
3. Save for a Bigger Down Payment
The more money you put down, the less you have to borrow. This means you’ll have a higher preapproval amount. If you want to increase your preapproval amount, try to save for a bigger down payment.
You can save by cutting back on expenses, selling items you no longer need, or setting up automatic savings. The more you can save, the better your preapproval amount will be.
4. Pay Off Debt
The less debt you have, the more you can borrow. If you want to increase your preapproval amount, focus on paying off your debt. This includes credit card debt, car loans, and student loans.
You can create a debt payoff plan by listing your debts in order of highest interest rate. Then, focus on paying off the debt with the highest interest rate first. Once that’s paid off, move onto the next debt.
5. Shop Around for Lenders
Not all lenders are created equal. Some lenders might be more willing to offer you a higher preapproval amount than others. That’s why it’s important to shop around for lenders.
You can compare rates and fees online or work with a mortgage broker who can do the shopping for you. By finding the right lender, you can increase your preapproval amount and potentially save on interest.
6. Consider a Co-Signer
If you’re still struggling to increase your preapproval amount, you can consider adding a co-signer to your mortgage. A co-signer is someone who signs the mortgage with you and agrees to be responsible for the loan if you can’t make the payments.
A co-signer can help you qualify for a higher preapproval amount because they’re adding their income and credit score to the application. Just make sure you trust your co-signer and understand the responsibilities involved.
7. Be Patient
Finally, it’s important to be patient. Increasing your preapproval amount takes time and effort. But if you follow these tips and stay committed, you can increase your preapproval amount and find the home of your dreams.
FAQs
What is a preapproval amount?
A preapproval amount is the maximum amount of money a lender is willing to loan you to buy a house. It’s based on several factors, including your income, credit score, and debt-to-income ratio.
Why is it important to increase my preapproval amount?
Increasing your preapproval amount can help you afford a more expensive home or a home in a more desirable location. It can also give you more bargaining power when negotiating with sellers.
Can I increase my preapproval amount after I’ve been preapproved?
Yes, you can. If your financial situation changes, you can ask your lender to reassess your preapproval amount. However, keep in mind that this might involve reapplying for a new loan.
Conclusion
Increasing your preapproval amount can be a game-changer when it comes to buying a home. By understanding your credit score, increasing your income, saving for a bigger down payment, paying off debt, shopping around for lenders, considering a co-signer, and being patient, you can increase your preapproval amount and find the home of your dreams.
