Steps to increase your mortgage pre-approval amount

When you’re pre-approved for a home loan, your loan officer and local mortgage lending team look at your financial and credit information and determine how much they’ll lend you to purchase your home and what loan best fits your life.

Mortgage pre-approval helps you find a price range for your home search and gives direction on how much you should save for a down payment. Pre-approval also lets the seller know you’re qualified to buy their home. Most sellers won’t even consider an offer unless the buyer is pre-approved at the right price.

When you fill out a mortgage application, how much you can be pre-approved for depends on several factors, including your income, employment status, credit score and debt-to-income ratio.

Keep in mind that just because you’re pre-approved for a certain amount doesn’t mean you should borrow the maximum. When determining how much home you can afford, it’s essential to look at your overall financial goals and factor in expenses related to owning a home, such as property taxes, homeowners insurance and maintenance costs. If your mortgage payments take up too much of your income, you may not have enough financial flexibility to save for other expenses, such as retirement or emergencies.

There are different ways to match your homebuying budget to the home you want. If you’re thinking about ways to increase your mortgage pre-approval amount, first ask yourself if reducing your homebuying budget would make more sense. Are there some must-haves on your list that you can move into your nice-to-have list? For example, can you reduce the number of bedrooms, move to a different neighborhood or skip a large yard?

These compromises may make homeownership more affordable on your current income, so you won’t need to increase your mortgage pre-approval amount. Second, ask your loan officer which factors limit your pre-approved amount, such as a high debt-to-income ratio or negative information on your credit report.

You may decide to take the following steps to improve your chances of getting a higher mortgage loan amount.

• 1. Increase your down payment

  Can you afford to make a larger down payment? If you put 20 percent down, you won’t be required to pay for ​​​​private mortgage insurance (PMI), which can add to your monthly mortgage payment. By avoiding PMI, your monthly payments will be lower, so you may qualify for a larger loan amount.

• 2. Bring your debt down

  Your debt-to-income ratio (DTI) compares the amount of money you owe to the amount you make. Your DTI is important because it reflects your ability to manage monthly mortgage payments and repay debts. Generally, a lower DTI is better for increasing your mortgage pre-approval amount. To lower your DTI, start by building a budget to track your income and expenses, then set a realistic goal of how much debt you’ll pay off each month. After ​​​​cutting any unnecessary spending, focus on eliminating high-interest debt first. Lastly, avoid taking on any new debt.

• 3. Add more income sources

  There are ways to show your lender that your income is higher besides asking for a raise at work. When you collect alimony and child support, it may be considered income. Other income sources include rental properties, dividends or income from a part-time job. Discuss all your potential income sources with your loan officer and ask if they will increase how much you can get pre-approved for a mortgage.

• 4. Opt for a longer loan term

  When you choose a longer loan term, such as a 30-year fixed-rate mortgage, your monthly payments will be lower than a shorter loan term. Selecting this loan may make your monthly mortgage payments more manageable because they’re more spread out. With smaller monthly payments, you can consider buying a more expensive home.

• 5. Get a co-signer

  While not all loan programs are eligible for a co-signer, having one may increase your mortgage pre-approval amount. That’s because a co-signer’s income and assets are combined with yours when a lender determines how much home you can afford.

• 6. Boost your credit score

  Your credit score and the financial information on your credit reports can determine the terms of your loan and, ultimately, whether you’re approved. Because errors could lower your credit score, check your credit reports for red flags that you can potentially correct before buying a home. You can also improve your credit score over time by making your payments on time, paying off debt and keeping low balances on credit cards.

If you don’t have a credit score or credit history, some programs will evaluate rent and other consistent payment histories instead of traditional credit reports for home loans. Guild’s Complete Rate program, powered by FormFree^®, offers an alternative method to measure credit risk for borrowers. If your FormFree report shows consistent rent payment history and good residual income history, you may qualify for a lower interest rate, lower fees or both.

Preparing for your mortgage pre-approval can be time sensitive. That’s why it’s best to start early. At Guild, our automated document processes streamline the experience by providing much of the required personal data automatically. However, here are some of the documents you may need to have handy, depending on the lender and your specific situation:

• A driver’s license/ID card and social security number
• Proof of employment with your most recent paystubs
• Two years of W-2s, 1099 forms and rental income
• P&L, if self-employed
• Two to three months of bank statements for proof of financing for your closing costs and down payment
• Information about personal debt and financial obligations

The loan process can be initiated regardless of whether you possess the items mentioned above.

Mortgage calculators give you a snapshot of all the costs and fees of a home purchase. They’re helpful tools as you start researching this process on your own, but they’re no substitute for a loan officer who can help you afford the home you want by finding the right loan to get you there.

Mortgage payment calculator

Determine the total amount of your monthly mortgage payment, including individual amounts of your principal payment, interest, taxes and homeowners insurance.

Mortgage income calculator

Find out what you can afford by reviewing your annual income and the size of the mortgage, monthly debt payments, interest rates, loan terms and the related expenses to buying a home.

Mortgage affordability calculator

See how much spending power you have when you first start shopping for a home, along with the breakdown of what goes into your monthly mortgage payment.

With branches in neighborhoods and communities from coast to coast*, we deliver on the promise of home. Our loan officers are part of your community and have been working with your neighbors since 1960. The first step to finding how much you can be pre-approved for is to get in touch—we’d love to work with you.