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How to Increase Your Mortgage Pre-Approval Amount: Strategies to Prequalify for a Home Loan

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What Is Mortgage Pre-Approval?

When you get pre-approved for a mortgage, a lender provides you with a letter that states how much of a loan amount you’re approved for. Why do lenders care how expensive a house you purchase, or how large of a loan amount you need? They should let you use your own judgment, right?

Wrong. Lenders need to ensure that you can make your loan payments, so you don’t default on your loan and get foreclosed upon. To make sure they approve you for an amount you can actually afford and won’t default on, lenders need to get a sense of your financial history and financial health.

Mortgage pre-approvals don’t only benefit your lender: they benefit you! Knowing what loan amount you can afford can really help you when you’re touring potential homes to buy. There’s nothing than getting your hopes up for a home, only to have them dashed when you can’t get pre-approved for that amount. You can use your pre-approval amount as a baseline when looking for homes.

What Lenders Consider When You Prequalify for a Mortgage

Lenders take many different factors into consideration when pre-qualifying or pre-approving you for a home loan. These include things like your debt to income ratio, your credit score, your assets, how much of a down payment you can put down, and more.

How to Increase Your Mortgage Pre-Approval Amount

If you’re comfortable with a certain monthly payment, but you’re not approved for that amount, there are certain ways that you can increase your pre-approval amount to get the home of your dreams. One of the main ways you can increase your pre-approval amount is to target your debt to income ratio: a key factor in loan pre-approval.

To improve your debt to income ratio, take a look at all of your debt accounts and see where you can make a change. Do you have a large car loan, or a lot of credit card debt? Do you have a ton of student loans? While paying down your debt can take time, it’s worth it in the long run.

Paying down your debt accounts on time can also help increase your credit score, another important factor when it comes to getting pre-approved. Improving your credit score can affect what type of loan you qualify for, as well as the amount.

Additionally, you can try to increase your down payment amount. If you’re right on the border of being able to put 20% down, wait a couple of months and save. If you can avoid paying PMI, you can get approved for a higher loan amount.

Conclusion

There are several ways to increase your mortgage pre-approval amount. Talk to an lender today to see what you’re approved for and how you can get approved for the highest amount.