Getting a bigger mortgage isn’t as easy as some first-time homebuyers might think. If you’re trying to buy a home that’s more than the maximum purchase price you’ve already been pre-approved for, there are still a few ways you can try to get a larger mortgage.
Before getting a mortgage pre-approval, here’s what you can do so you can spend more on a home:
Make a larger down payment
One of the factors that plays into how big of a mortgage you can get approved for is the size of your down payment. This is also one of the factors that’s reasonably within your scope of control. While you need a minimum 5% down payment to purchase a home costing less than $500,000, you’ll need at least 5% down on the first $500,000 and 10% on the amount between $500,000 and $999,999. For example, on a $800,000 home you’ll need to make a down payment of $55,000 or 6.9%. If you can make a larger down payment, you’ll be able to get a larger mortgage and spend more on a home.
Increase your income
If you find out that your preferred mortgage pre-approval provider isn’t actually willing to give you the full loan amount you need, you can ask about what level of income you’ll need. Switching jobs or career paths isn’t quite on our list of things to do for many of us. Unfortunately, that makes this method much more easily said than done. Nonetheless, if you can get a job with a higher salary, lenders will let you get a bigger mortgage.
As an alternative to finding a higher-paying job, you can try applying for the mortgage with your partner or a co-signer (for example, your parents) who also has a steady source of income. Doing so will help you get a larger mortgage. On the other hand, if you do find ways to increase your income, make sure that these income sources are stable and reliable.
Find a lower mortgage rate
Getting the best mortgage rate means lower mortgage payments and can reduced the overall cost of homeownership. Finding a lender who’ll approve you for a lower mortgage rate will let you put a larger portion of your payments towards the principal, rather than the interest.
But don’t take low rates for granted. If rates increase before your term ends, you could find yourself having to make larger mortgage payments.
Improve your credit
If you have a bad credit score, it might take some time before you can expect to get pre-approved for a larger mortgage. You should make sure to pay your credit card bills on time, not max out your credit card bill, and avoid applying for more credit. And bad credit also means you won’t get the best mortgage rate. That’s another reason why it pays to be responsible with your credit.
The bottom line
As you can see, there are many things you can do to get a larger mortgage. Before getting a pre-approval, you can use a mortgage affordability calculator, which will give you an estimate of what you can afford.
- The Dos and Don’ts of Getting a Mortgage Pre-approval
- How My Wife and I Saved a 50% Down Payment
- Should You Spend the Full Amount of Your Mortgage Pre-approval?