How To Increase Your Mortgage Pre-Approval Amount
If your mortgage pre-approval offer came back lower than you were hoping for, you can still take action to raise it—here’s how.
Written by Abbey Orzech
Reviewed by Melanie Reiff
There are several steps you can take to increase your mortgage pre-approval amount, including raising your credit score, recording more income, paying down debts, going through a different mortgage lender, and using a co-signer.
When house hunting, a mortgage pre-approval significantly ups your market competitiveness and typically makes securing a new home easier. Sometimes, though, the pre-approval amount you’re quoted won’t cover the cost of your home-of-choice or match your payment ability.
The good news is you won’t have to just passively accept the lower pre-approval amount in every scenario. There are actions you can take that could increase your lending offer, and
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What does a mortgage pre-approval do?
Getting a mortgage pre-approval is one of the first steps of purchasing a new home—it’s the amount of money a mortgage lender is willing to loan you, which is determined by your financial situation.
Your income, total assets, and credit score are the defining factors of your financial picture. To prove you’re in good financial standing, you’ll submit all relevant documentation to your lender.
However, you may feel that your ability to make mortgage payments was not accurately represented by your mortgage approval. If that’s the case for you, you’re not simply stuck with a low quote—there are ways to increase your pre-approval amount.
Tips for increasing your mortgage pre-approval amount
Before diving into any of these tactics, the first thing you need to do is sit down with your finances.
Realistically outline your budget and see how much you’d be spending on your home expenses each month with your desired mortgage payment. Ideally, you shouldn’t be spending more than 30% of your gross monthly income on all your housing expenses.
If you assess your financial situation and decide that taking on a larger mortgage payment may not be a smart move, it might be wise to search for a lower-priced home. On the other hand, if it makes sense to try to increase your mortgage pre-approval amount, go for it! Here are some actions that can prompt a lender to give a bigger offer.
Raise your credit score
This may not be the quickest route but your credit score is one of the main factors considered in your pre-approval application.
A low credit score will negatively impact your lending offer so if you can raise your credit score, you’re more likely to get preapproved for a larger amount.
Account for all sources of income
In addition to your paycheck, sources of income can include:
- Alimony payments
- Child support
- Income from investment properties
- Disability payments
- Income bonuses
- VA benefits
- Retirement benefits
The more proof of income you’re able to provide, the higher the likelihood you’ll get preapproved for the amount you require.
Pay down debts
Of course, this may be easier said than done, but a long list of debts can also negatively impact your pre-approval offer. The mortgage lender will take note of your debts and account for more of your income going towards other payments.
If possible, paying off or paying down some of your debts can give your pre-approval offer a boost.
Try a different lender
Not every lender weighs your financial details in the same way and what one lender will deny, another may accept. Gather quotes from a few different lending sources to see if any of them can offer you a higher pre-approval amount.
Extend your loan term
Longer loan terms mean lower monthly mortgage payments. Lenders are more willing to increase the loan amount if your monthly payments will be more manageable for your financial situation.
Be aware, though, that extending your loan term typically means you’ll see a higher interest rate, which means you’ll end up paying more towards your loan over time.
Increase your down payment
A down payment of 20% will remove the need for mortgage insurance, which would otherwise get tacked onto your monthly mortgage payments. If you don’t need to factor in mortgage insurance, you’ll have more income available to go towards the principal balance and accrued interest.
Use a co-signer
A co-signer is someone that can offer up their income or assets to supplement your own that agrees to take on the mortgage if you stop making payments.
This can make it difficult to find a co-signer, but if you have a willing family member or friend with enough income, you’ll be much more likely to see an increased pre-approval amount.
If you’re not able to find a co-signer and none of the other above tactics for raising your pre-approval amount are feasible, the best thing to do may be to search for a more affordable home.
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How can I increase my mortgage pre-approval amount?
You can increase your mortgage pre-approval amount by raising your credit score, ensuring all sources of income are accounted for, paying off debts, going through different lenders, extending your loan term, increasing your down payment, or using a co-signer on your application.
Do I need a mortgage pre-approval to buy a house?
A mortgage pre-approval is not necessary for every home buying scenario, though many real estate agents will choose not to work with you without one. Getting a mortgage pre-approval tells real estate agents that you’re actually able to afford the homes you’re looking at.
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