As prices of homes are rising to surprisingly new levels in the US, you might feel eager to buy a bigger mortgage loan in order to purchase the home of your dreams or refinance the loan that you’re currently holding. In short, this seems to be a perfect time for obtaining a larger loan. The rates of mortgage are pretty low and even the jumbo rates are also affordable. The jumbo loans are those that lend you more than $425,100 for buying a home.
In case you’re someone who wishes to buy a bigger home and you need a better borrowing power, here are few strategies that can help you qualify for a bigger loan.
1: Offer proof of more income
If you can prove that your earnings are higher, you could land up with a bigger loan amount. Apart from your wages or salary, you may even show some other reliable sources of income if you want to qualify for a bigger loan amount. You can show income from dividends from investments, from rental party, from child support or alimony or from money that you make from a part-time job. For refinancing an existing loan, you could even show the mortgage holder’s Social Security income.
2: Pay off all other obligations
When you apply for a home loan, lenders take a close look at your DTI ratio which is the percentage of the monthly income that you’re using for making your monthly mortgage installments. Usually, lenders look for a DTI of 35% for a person to qualify for a bigger loan. Moreover, there are lenders who are comfortable with better DTIs. When you owe debt, you can pay off an installment loan or a credit card and this can make a big difference to your DTI.
3: Boost your credit score
The higher your credit score is, the lower will be the interest rate that the lender will charge you. Now if you wish to get a bigger mortgage, you should have stellar credit rating. This can ease off the path of qualifying for a better mortgage amount. Make sure you pay on time, avoid maxing out your credit limit and avoid applying for more credit while you’re approaching home loan lenders for a mortgage,
4: Pay down at least 20%
While buying a home, if your down payment is at least 20% of the total price of the loan, you won’t qualify for PMI or Private Mortgage Insurance which unnecessarily increases your monthly mortgage installments. Hence, before approaching the mortgage lenders make sure you’ve saved enough for a bigger down payment. When you’re able to pay down even more than 20% of the loan amount, you can qualify for a bigger loan.
Therefore, given the current market conditions, it is better to snag a mortgage deal with your mortgage lender and buy the dream house that you’ve always dreamt of. Follow the steps mentioned above to seal the deal on a bigger loan.