How To Increase Your Mortgage Preapproval Amount

Finding out how much you can borrow to purchase a home can be thrilling. When you know how much home you can afford, you can confidently set off on your house hunt and learn what types of homes fit within your budget. However, it can be disheartening to discover that the amount of space or top-of-the-line features you want are just a bit out of your price range.

If you need more money to afford the home of your dreams, there are steps you can take to increase your preapproval amount. But you should only do this if you can afford to borrow more and can meet the financial obligations of a higher loan amount.

How Does A Mortgage Preapproval Work?

A mortgage preapproval is the lender’s statement on how much money you’re approved to borrow to purchase a home. The mortgage lender determines the amount by reviewing your income, assets, debts and credit score. Based on that information, the lender will come up with an amount they believe you’ll be able to handle based on your borrowing history, income and other financial commitments.

It’s wise to get preapproved before buying a home because it tells you how much house you can afford. It also helps you set a home buying budget, and a preapproval shows sellers you’re a serious buyer who can secure financing.

Can You Increase Your Preapproval Amount?

Yes, you can increase your preapproval amount.

Because your mortgage preapproval is largely determined by your credit score, income and debt-to-income ratio (DTI), you can help increase it by improving your credit score, earning extra income and paying off your debt, which would lower your DTI.

The advantage of a higher preapproval amount is that it opens you up to many more homes on the market. Your expanded home options can be especially helpful if you’re home shopping in a seller’s market.

How To Increase Your Mortgage Preapproval Amount: 7 Tips

If you’re trying to figure out how to increase your mortgage preapproval amount while buying a house, consider what the mortgage lender looks at to determine the amount they’ll lend: income, debt and credit score.

Now, consider these strategies to increase your mortgage preapproval amount. But keep in mind that it may take some time to accomplish some of these goals.

1. Reduce Your Debt

By paying off debt before buying a house, you can improve your DTI. Reducing your debt can increase the home loan amount you’re approved to borrow because it decreases your financial obligations. You have more money to pay toward a home loan without that extra debt to pay off each month.

Reducing your debt will also lower your credit utilization (the percent of your total available credit that you’ve borrowed), which makes up about 30% of your credit score. By lowering your utilization, you can help boost your credit score.

Snowball Method Vs. Avalanche Method

To reduce your debt, consider using the snowball method or the avalanche method.

• Snowball method: Pay your debts off in order of balance. Make minimum payments on the rest of your debts but throw all your extra money toward paying off your lowest-balance debt first. Once your lowest balance is paid off, put all the money you were paying on that debt toward paying your next lowest-balance debt.
• Avalanche method: This method works the same way, except you’ll focus on paying your highest-interest debt first and then your next highest-interest debt, and so on.

2. Generate More Income

Generating more income can help you financially prepare to buy a house and increase your preapproval. It can lower your DTI and enable you to pay a higher monthly mortgage payment.

Here are a few ways you may be able to increase your income:

• Negotiate a raise
• Increase your working hours if you’re hourly
• Take on a part-time or freelance job
• Get gig work (driving for a rideshare company, delivering food or groceries, etc.)
• Sell used, refurbished or handmade items online
• Rent out a room in your home

It’s important to keep in mind that while getting a new, higher-paying job can increase your income, you shouldn’t change jobs while you’re in the process of buying a home or just before you’re preapproved. Remember, the lender wants to be sure you’re bringing in a steady income and have a stable work history.

If you’re planning on changing jobs, let your lender know as soon as possible. You may also want to wait a few months to settle into your job to apply for a loan.

3. Increase Your Down Payment

The larger the down payment, the greater the chance of being approved for a larger preapproval amount. If you make a down payment that’s less than 20%, you’ll likely pay mortgage insurance.

If you put down 20% or more on a conventional loan, you’ll avoid paying private mortgage insurance (PMI). A larger down payment may unlock borrowing power by increasing your preapproval amount and getting you better loan terms and rates.

4. Raise Your Credit Score

A credit score helps determine the amount you’re approved to borrow and the type of loan you’ll get. That’s because there are different credit score requirements for different types of loans.

If your credit score is in the 600s, work on improving your credit score to help increase your preapproval amount and give yourself more loan options. The first step is to review your credit report and report any credit errors that may be affecting your score. If you can, work on paying down your debt, which will lower your credit utilization. And of course, continue to make at least the minimum payment on all your monthly bills on time.

While you’re employing these strategies to increase your score, make sure you’re steering clear of activities or behaviors that could hurt your score.

• Keep credit utilization low: Do not make a big purchase on your credit card or take on additional debt with another loan. Big purchases and new loans will increase your credit utilization, and many credit experts advise keeping your credit utilization rate below 30%.
• Pay bills on time: Do not miss any of your debt payments. That will lower your score and put up a red flag that you’re not a responsible borrower.
• Leave accounts open: Do not close out your oldest accounts – not even the ones you aren’t using. Closing out credit cards will shorten your credit history.
• Keep hard inquiries at a minimum: Do not apply for numerous loans or open new accounts. Every time you apply for credit, a lender does a hard inquiry on your credit report that temporarily drops your score. And multiple applications may give lenders the impression that you’re in need of money or having trouble managing your debt.

5. Compare Financing Options

One of the easiest ways to potentially increase your preapproval amount is to get preapproved by a few different lenders. This method, known as “shopping around,” may help you find better loan terms and get a higher preapproval amount than if you worked with one lender.

Different lenders may have different requirements during their underwriting process. So you might get a different preapproval amount from each lender.

6. Add A Co-Borrower Or Co-Signer

With a co-borrower or co-signer’s shared income and credit history tacked on to your mortgage application, you increase your chances of getting approved for a larger loan amount. A co-borrower or co-signer can be a family member, spouse or friend.

A co-borrower is a full partner in your homeownership journey and shares title for your property. They are also responsible for the monthly mortgage payment, and they have partial ownership of the home.

A co-signer, on the other hand, is a pinch hitter for your loan. They promise to pay off the loan if you can’t, but they don’t share title. Depending on your circumstances, either option may be a better fit.

7. Opt For A Longer Loan Term

Obtaining a higher preapproval might be as simple as applying for a different loan package. Mortgage lenders are typically more likely to offer a higher preapproval to home buyers taking out a 30-year mortgage than a 15-year mortgage. Your lender may recognize that you can better manage a fixed-rate mortgage loan with payments that stretch out over 30 years. And you may even be able to make extra payments to pay off the loan early.

How To Avoid Borrowing Too Much While Maximizing Preapproval

If you get what you wished for – a higher preapproval amount – you shouldn’t take it as a pass to only shop for homes at your preapproval maximum. It may make more sense to remain at the lower end of your home buying budget to avoid most of your money going toward your housing costs. Stretching yourself too thin financially may leave you living paycheck to paycheck and force you to put other financial goals on pause.

Make sure you understand all the costs of owning a home before you contemplate house hunting at your maximum preapproval amount.

Mortgage Preapproval Amount FAQs

It’s common for home buyers to want to get a larger mortgage so that they can widen their home search. But you want to make sure that your home buying strategy is in line with your financial situation. Here are the answers to some of the most frequently asked questions about how increasing your mortgage preapproval amount works.

Why is my preapproval amount so low?

There are several reasons why your preapproval amount could be lower than you expected. Typically, it’s because the information you provide during the preapproval process is not quite where you might want it to be. You could have slightly low gross monthly income for the mortgage amount you are seeking, or your debt-to-income ratio could be too high. Regardless, it’s best to get in touch with a mortgage professional for insight into your specific financial situation.

Can I offer more than my preapproval amount for a house?

You can offer more than you’ve been approved for when bidding on a house. However, this is usually not recommended, as it means you would need to come up with the additional money needed to match the purchase price out-of-pocket. In general, it’s better to present an offer on a house that is lower than your mortgage preapproval amount.

Should I show a seller my preapproval letter?

It’s usually a good idea to share your preapproval letter with the seller of a home you’re in the market for. Having that preapproval shows the seller that you’re serious and that a mortgage lender has already deemed you trustworthy for a loan of the appropriate amount. That said, speak with a real estate agent to make sure it’s the right move for your home buying journey.

Finding out how much you can borrow to purchase a home can be thrilling. When you know how much home you can afford, you can confidently set off on your house hunt and learn what types of homes fit within your budget. However, it can be disheartening to discover that the amount of space or top-of-the-line features you want are just a bit out of your price range.

If you need more money to afford the home of your dreams, there are steps you can take to increase your preapproval amount. But you should only do this if you can afford to borrow more and can meet the financial obligations of a higher loan amount.

How Does A Mortgage Preapproval Work?

A mortgage preapproval is the lender’s statement on how much money you’re approved to borrow to purchase a home. The mortgage lender determines the amount by reviewing your income, assets, debts and credit score. Based on that information, the lender will come up with an amount they believe you’ll be able to handle based on your borrowing history, income and other financial commitments.

It’s wise to get preapproved before buying a home because it tells you how much house you can afford. It also helps you set a home buying budget, and a preapproval shows sellers you’re a serious buyer who can secure financing.

Can You Increase Your Preapproval Amount?

Yes, you can increase your preapproval amount.

Because your mortgage preapproval is largely determined by your credit score, income and debt-to-income ratio (DTI), you can help increase it by improving your credit score, earning extra income and paying off your debt, which would lower your DTI.

The advantage of a higher preapproval amount is that it opens you up to many more homes on the market. Your expanded home options can be especially helpful if you’re home shopping in a seller’s market.

How To Increase Your Mortgage Preapproval Amount: 7 Tips

If you’re trying to figure out how to increase your mortgage preapproval amount while buying a house, consider what the mortgage lender looks at to determine the amount they’ll lend: income, debt and credit score.

Now, consider these strategies to increase your mortgage preapproval amount. But keep in mind that it may take some time to accomplish some of these goals.

1. Reduce Your Debt

By paying off debt before buying a house, you can improve your DTI. Reducing your debt can increase the home loan amount you’re approved to borrow because it decreases your financial obligations. You have more money to pay toward a home loan without that extra debt to pay off each month.

Reducing your debt will also lower your credit utilization (the percent of your total available credit that you’ve borrowed), which makes up about 30% of your credit score. By lowering your utilization, you can help boost your credit score.

Snowball Method Vs. Avalanche Method

To reduce your debt, consider using the snowball method or the avalanche method.

• Snowball method: Pay your debts off in order of balance. Make minimum payments on the rest of your debts but throw all your extra money toward paying off your lowest-balance debt first. Once your lowest balance is paid off, put all the money you were paying on that debt toward paying your next lowest-balance debt.
• Avalanche method: This method works the same way, except you’ll focus on paying your highest-interest debt first and then your next highest-interest debt, and so on.

2. Generate More Income

Generating more income can help you financially prepare to buy a house and increase your preapproval. It can lower your DTI and enable you to pay a higher monthly mortgage payment.

Here are a few ways you may be able to increase your income:

• Negotiate a raise
• Increase your working hours if you’re hourly
• Take on a part-time or freelance job
• Get gig work (driving for a rideshare company, delivering food or groceries, etc.)
• Sell used, refurbished or handmade items online
• Rent out a room in your home

It’s important to keep in mind that while getting a new, higher-paying job can increase your income, you shouldn’t change jobs while you’re in the process of buying a home or just before you’re preapproved. Remember, the lender wants to be sure you’re bringing in a steady income and have a stable work history.

If you’re planning on changing jobs, let your lender know as soon as possible. You may also want to wait a few months to settle into your job to apply for a loan.

3. Increase Your Down Payment

The larger the down payment, the greater the chance of being approved for a larger preapproval amount. If you make a down payment that’s less than 20%, you’ll likely pay mortgage insurance.

If you put down 20% or more on a conventional loan, you’ll avoid paying private mortgage insurance (PMI). A larger down payment may unlock borrowing power by increasing your preapproval amount and getting you better loan terms and rates.

4. Raise Your Credit Score

A credit score helps determine the amount you’re approved to borrow and the type of loan you’ll get. That’s because there are different credit score requirements for different types of loans.

If your credit score is in the 600s, work on improving your credit score to help increase your preapproval amount and give yourself more loan options. The first step is to review your credit report and report any credit errors that may be affecting your score. If you can, work on paying down your debt, which will lower your credit utilization. And of course, continue to make at least the minimum payment on all your monthly bills on time.

While you’re employing these strategies to increase your score, make sure you’re steering clear of activities or behaviors that could hurt your score.

• Keep credit utilization low: Do not make a big purchase on your credit card or take on additional debt with another loan. Big purchases and new loans will increase your credit utilization, and many credit experts advise keeping your credit utilization rate below 30%.
• Pay bills on time: Do not miss any of your debt payments. That will lower your score and put up a red flag that you’re not a responsible borrower.
• Leave accounts open: Do not close out your oldest accounts – not even the ones you aren’t using. Closing out credit cards will shorten your credit history.
• Keep hard inquiries at a minimum: Do not apply for numerous loans or open new accounts. Every time you apply for credit, a lender does a hard inquiry on your credit report that temporarily drops your score. And multiple applications may give lenders the impression that you’re in need of money or having trouble managing your debt.

5. Compare Financing Options

One of the easiest ways to potentially increase your preapproval amount is to get preapproved by a few different lenders. This method, known as “shopping around,” may help you find better loan terms and get a higher preapproval amount than if you worked with one lender.

Different lenders may have different requirements during their underwriting process. So you might get a different preapproval amount from each lender.

6. Add A Co-Borrower Or Co-Signer

With a co-borrower or co-signer’s shared income and credit history tacked on to your mortgage application, you increase your chances of getting approved for a larger loan amount. A co-borrower or co-signer can be a family member, spouse or friend.

A co-borrower is a full partner in your homeownership journey and shares title for your property. They are also responsible for the monthly mortgage payment, and they have partial ownership of the home.

A co-signer, on the other hand, is a pinch hitter for your loan. They promise to pay off the loan if you can’t, but they don’t share title. Depending on your circumstances, either option may be a better fit.

7. Opt For A Longer Loan Term

Obtaining a higher preapproval might be as simple as applying for a different loan package. Mortgage lenders are typically more likely to offer a higher preapproval to home buyers taking out a 30-year mortgage than a 15-year mortgage. Your lender may recognize that you can better manage a fixed-rate mortgage loan with payments that stretch out over 30 years. And you may even be able to make extra payments to pay off the loan early.

How To Avoid Borrowing Too Much While Maximizing Preapproval

If you get what you wished for – a higher preapproval amount – you shouldn’t take it as a pass to only shop for homes at your preapproval maximum. It may make more sense to remain at the lower end of your home buying budget to avoid most of your money going toward your housing costs. Stretching yourself too thin financially may leave you living paycheck to paycheck and force you to put other financial goals on pause.

Make sure you understand all the costs of owning a home before you contemplate house hunting at your maximum preapproval amount.

Mortgage Preapproval Amount FAQs

It’s common for home buyers to want to get a larger mortgage so that they can widen their home search. But you want to make sure that your home buying strategy is in line with your financial situation. Here are the answers to some of the most frequently asked questions about how increasing your mortgage preapproval amount works.

Why is my preapproval amount so low?

There are several reasons why your preapproval amount could be lower than you expected. Typically, it’s because the information you provide during the preapproval process is not quite where you might want it to be. You could have slightly low gross monthly income for the mortgage amount you are seeking, or your debt-to-income ratio could be too high. Regardless, it’s best to get in touch with a mortgage professional for insight into your specific financial situation.

Can I offer more than my preapproval amount for a house?

You can offer more than you’ve been approved for when bidding on a house. However, this is usually not recommended, as it means you would need to come up with the additional money needed to match the purchase price out-of-pocket. In general, it’s better to present an offer on a house that is lower than your mortgage preapproval amount.

Should I show a seller my preapproval letter?

It’s usually a good idea to share your preapproval letter with the seller of a home you’re in the market for. Having that preapproval shows the seller that you’re serious and that a mortgage lender has already deemed you trustworthy for a loan of the appropriate amount. That said, speak with a real estate agent to make sure it’s the right move for your home buying journey.

The Bottom Line: Only House Shop What You Can Afford

With a higher credit score and lower DTI, you may get better loan terms, including lower interest rates from your lender, in addition to increasing your mortgage preapproval amount. But take time to consider whether you should borrow more money.

The more you borrow, the more you’ll need to pay back and the higher your monthly payment will likely be. Really look into your finances and figure out what you can reasonably afford before borrowing too much. It may also help to talk to a financial advisor.

If you’re looking for a new home and want to know how much house you can afford, start the application process today.

The Bottom Line: Only House Shop What You Can Afford

With a higher credit score and lower DTI, you may get better loan terms, including lower interest rates from your lender, in addition to increasing your mortgage preapproval amount. But take time to consider whether you should borrow more money.

The more you borrow, the more you’ll need to pay back and the higher your monthly payment will likely be. Really look into your finances and figure out what you can reasonably afford before borrowing too much. It may also help to talk to a financial advisor.

If you’re looking for a new home and want to know how much house you can afford, start the application process today.