9 Ways to Increase Your Mortgage Pre-Approval Amount

Want to make your homebuying dollar go further? Find out how you may be able to qualify for additional funds in order to buy the house of your dreams.

When you’re beginning the home search process, you’re probably a little more focused on countertop materials and square footage than bottom-line budget. While that’s fun at first, eventually you’ll want to get down to business, and that means talking to a lender about how much home you can afford. In some cases, hopeful buyers run into a roadblock when they find out that their budget won’t cover some of the fancy bells and whistles they’ve put on their wishlist. If you’re wondering how to increase your mortgage pre-approval amount, read on for some solid strategies to maximize your buying power.

Can I increase my loan pre-approved loan amount?

Unlike a pre-qualification, a home loan pre-approval is based on paperwork and financial records that you provide to the lender, including employment and income verifications. Whereas a pre-qualification is based on a verbal or written guesstimate of your financial readiness, a pre-approval involves a hard pull of your credit to provide a clearer picture of the amount you may be able to pay toward your mortgage each month. 

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In some cases, you can ask for additional funds over and above your pre-approved amount. The first question you must ask yourself, however, is whether it is wise to do so. If you are taking on too much debt or buying too much house, you could find yourself struggling to make your mortgage payments each month. The 28 percent rule states that you should spend 28 percent or less of your monthly gross income on housing, to include principal, interest, taxes, and homeowners insurance. If you are purchasing a home in a neighborhood with an HOA or in a condominium community, that amount should be included, as well.

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If there has been a change in your circumstances that supports a higher pre-approval, that may be a different story. These may include any of the following:

1. An increase in your salary or overall compensation: This can come in the form of either a salary increase at your current job or the addition of a side-gig or freelance position. If your additional income comes from self-employment, talk to your lender about how to document it for consideration during the pre-approval process.
2. The addition of increased monthly income through alimony, child support, or other court-ordered payments: In order to use this as part of your pre-approval, you will need to show both that the payments have been consistently on time and that they are likely to continue for the foreseeable future. If, for example, your child support payments will be ending soon because your youngest child is turning 18, they will not count toward your pre-approval. 
3. A larger down payment, which may make you eligible for better terms and obviate the need for private mortgage insurance (PMI) if 20 percent or above: With a 20 percent down payment, you will not only reduce the amount you’re borrowing, but you may also qualify for more favorable interest rates.
4. The addition of a co-borrower who will contribute to the mortgage payments: A co-borrower doesn’t have to be a spouse or significant other; it could be a parent, sibling, or friend who wants to take advantage of the financial benefits of homeownership. Make sure, however, that you have a plan in place in case either of you should decide you want to move or make changes to the home. In addition, make sure you’ve clearly outlined who will be responsible for maintenance, utilities, and other items. 
5. An improvement in your credit score, making you more creditworthy: This can come about when you correct an error, pay down debt, or otherwise improve your overall financial picture.
6. The repayment of outstanding debt: In addition to its impact on your credit score, paying off outstanding debt means that you have more money available each month to put toward your mortgage. That may make you eligible for an increase in your pre-approval.
7. Careful consideration of a variety of financing options to determine which ones offer the best terms: There can be big differences among mortgage products, so it’s a good idea to compare different loans and find out which one will not only save you money overall but will also increase your homebuying budget.
8. Extending the financing period: If you’ve been determined to buy with a 10- or 15-year mortgage, you may find that extending the financing period to 30 years gives you more purchasing power, as well. Remember, you can always make extra payments to the principal on your loan and pay it down earlier, should you wish to do so.
9. Using part of the space as a rental property or purchasing a space with rental potential: A carriage house, guest house, finished basement, or garage apartment all hold the potential for short-term or long-term rental and additional income. In fact, the term house-hacking was coined to describe savvy homebuyers who purchase multi-unit properties and take in tenants to pay some or all of the mortgage payment each month.

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It is a good idea to talk with your lender early on and find out how to optimize your pre-approval from the beginning so that you can make more informed decisions throughout the home search process.

Can I buy higher than my pre-approval?

If you have additional funds to put toward your home purchase, you can certainly buy more home than your pre-approval would allow. That money will have to come out of your own pocket or, in the case of some mortgage products, may be provided through gift funds from a close family member.

Can you get pre-approved for a mortgage multiple times?

Generally, a mortgage pre-approval lasts for 90 days, though you may be able to obtain an extension in some cases. If you anticipate a long escrow process for your home purchase, talk to your lender about your options. You may be required to provide updated information, including new tax filings, bank statements, or employment verification.

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