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How To Increase Your Mortgage Preapproval Amount

Scott Steinberg5-Minute Read
January 14, 2022

Home prices are steadily rising in many areas of the country, and as markets become more competitive, a few simple shifts in strategy and approach can help you gain access to additional funding.

As a borrower, it’s important to ask yourself: How much down payment can I afford? What type of credit score do I need to work with lenders? And can I afford the interest rates and monthly mortgage payments? To help give you a good idea of your loan amount, it’s paramount that you get preapproved when you’re ready to begin the buying process.

Once preapproved, it’s possible to adjust your preapproval amount. Let’s take a closer look at how to increase your mortgage preapproval amount, and how to boost your home loan borrowing power.

Can You Increase Your Mortgage Preapproval Amount?

Yes, absolutely – it’s entirely possible to increase your mortgage preapproval amount. In fact, it’s often advantageous to do so, with interest rates on jumbo mortgages still favorable and prices on homes steadily rising in many geographic areas. Raising your preapproval amount can be advantageous in situations like when you’ve found a dream home that costs more than you’ve originally qualified for, or if you’re shopping in a competitive locale. Likewise, you might also want to increase your mortgage preapproval amount if you want to expand the range of properties and destinations that you’re exploring as part of the shopping process.

How To Increase Your Mortgage Preapproval Amount

Every financial lender will extend different terms and offers, and there are several steps that you can take to increase the mortgage amount that they are willing to lend you.

Include All Sources Of Income

To maximize the amount of home loan that you are approved for as a homebuyer, be sure to share all sources of income that you’re privy to with your lender. After all, salary and wages from full- or part-time employment don’t always tell the full tale about your finances, and the higher your earnings are overall, the greater your chances are of scoring a bigger loan. Income streams that may go under the radar unless you actively point them out include:

  • Child support payments
  • Alimony
  • Passive income from a rental property
  • Interest or dividends produced by your investments
  • Funds earned from a part-time job, second gig or side hustle

Put Down 20%

Saving up to put a 20% down payment on a property can also help you increase the amount of monies that you’re preapproved to access via a home loan. That’s because extending a down payment of this size serves as an act of good faith that builds trust with your lender and lowers the potential risk they’re assuming with you as a borrower. In addition, making a sizable down payment on a home makes it possible to qualify for a larger home mortgage as you won’t need to pay mortgage insurance as part of your monthly payments. Keep in mind that avoiding private mortgage insurance (PMI) is also a smart strategy in general, noting that under its terms, you’re paying for insurance that protects your lender if you stop paying your loan. (Not insuring and protecting yourself.) 

Increase Your Credit Score

Having a higher credit score can further lead to you receiving a higher loan amount – and lower the interest rate. Luckily for those whose credit history may be lacking, there are several things you can do to raise your credit score. For example, you can take out credit-building cards and loans that help you establish a history of dependable and timely payments; clear up any errors in your credit reports; or even apply rent and utility bill payments to your account. Making a point not to max out your credit facilities can also help you boost your credit score as well.

Pay Off Other Debt

A major factor that impacts a lender’s willingness to extend mortgage preapproval is your debt-to-income (DTI) ratio, which compares the amount of monthly income you bring in against your monthly debt payments. Expressed as a percentage, it’s generally best to stay below a 36-38 percent debt-to-income ratio if you’re looking to obtain a larger loan. In effect, actively paying off other debt can help you obtain a larger mortgage preapproval amount by lowering your DTI ratio, and allowing you to put more income toward monthly mortgage payments. This may mean paying off your credit card or car, consolidating and refinancing debt, or paying down a personal loan.

Consider A Longer Mortgage Term

Taking out a 30-year mortgage can also lead to a larger preapproval amount as compared to a 15-year mortgage. That’s because it splits up the total amount that is borrowed over more payments. It’s not uncommon to see lenders extend homebuyers’ mortgage preapprovals in larger amounts if they’re willing to increase the length of the term over which a loan is serviced. Noting this, be sure to shop around and compare home loan options – you may be able to quickly increase your mortgage preapproval amount just by applying for a different loan package.

Add A Co-Borrower

Adding a co-borrower to your home loan application can also increase your total household income, which can lead to a larger mortgage preapproval amount. Bearing this in mind, you may wish to include another party with strong credit, a reliable payment history, and steady income on your loan application. In effect, by introducing a co-borrower, you can boost how much money your household brings in for purposes of mortgage preapproval calculations – and in turn increase the total amount of monies that a lender is willing to let you borrow.

Save Up And Shop Around

Holding added savings and cash reserves can also help you obtain mortgage preapproval in larger amounts. Noting this, it always pays to have a nest egg stashed away, as it gives lenders greater comfort that you’ll be able to make reliable and timely payments.

In addition, as touched on briefly earlier, individual lenders will extend home mortgages to you in different loan amounts, and with varying interest rates, terms and conditions. Keeping this top of mind, you’ll want to shop around to compare rate quotes and loan offers and give yourself the option to pick and choose the most favorable loan packages.

Of course, if your preferred lender hasn’t extended you as much money as you’d like to receive, from a strategic standpoint, you can also leverage an offer from another provider to help increase your mortgage preapproval amount as well.

Avoid Borrowing More Than You Can Afford

Of course, while it’s often helpful to increase your mortgage preapproval rate, it’s also best to not take out more of a home loan than you can afford. As you go about plotting your budget, it may help to follow the 28% rule. Put simply: You’ll want to avoid spending more than 28% of your monthly gross income on your mortgage, to allow ample cushion for other expenses such as food, transportation, and unexpected events where possible.

The Bottom Line

Finding ways to strengthen your financial profile and increase your mortgage preapproval amount doesn’t have to be as difficult or time-consuming as it may seem at first blush. From increasing the amount of your down payment to boosting your credit score and adding a co-borrower to your loan application, there are a number of steps that you can take to increase your mortgage preapproval amount.

Mind you: It’s important not to borrow more than you can afford. But for those looking to obtain a home loan, it pays to remember that there are many strategies that you can leverage to secure the best interest rates, better payment options, and loans in larger amounts.

Interested in learning more about the mortgage preapproval process and other home buying topics? Be sure to check out the Rocket HQSM Learning Center.

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    Scott Steinberg

    Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. He’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD.