October 25th, 2017 8:58 AM by Jackie A. Graves, President
With home prices rising to new heights in much
of the United States, you may want or need a bigger mortgage to buy the home
you want or refinance your existing home loan.
It’s a great time to apply for a larger
loan. Mortgage rates remain low, even on jumbo mortgages, which in most parts of the
U.S. are loans of more than $424,100.
If you’ve got your eye on a house that’s
climbing in value or if you otherwise need more borrowing power, these five
strategies could help you qualify for a larger mortgage.
1. Show more income
Higher earnings could land you a bigger loan.
In addition to your salary or wages, you might
be able to use other sources of reliable income to qualify. These may include:
Denise Supplee, co-founder of SparkRental,
a website for rental property investors, needed more income for her own refi
and thought of her live-in mother.
“Starting a new business and having half the
income I did when we purchased the home, I knew refinancing was going to be
challenging,” says Supplee.
“Originally, my mother was not on the loan,
nor did we have her pay any of the expenses,” she adds. “However, in the
refinancing, I asked our loan officer if we could use her Social Security
income to get the job done.”
2. Pay off other debt
When you apply for a mortgage, lenders look at
your debt-to-income ratio, or DTI, which is the
percentage of your monthly income that you’re shelling out for your minimum
monthly debt payments.
Generally, a DTI of around 35 percent is
considered good and will help you qualify for a larger loan. Some lenders are
comfortable with even higher DTIs.
Paying off a credit card or installment loan
can make a huge difference, says Jennifer Beeston, vice president of mortgage
lending at Guaranteed Rate Mortgage in Santa Rosa,
“Often, I will see on someone’s credit a debt
with a $2,000 balance and $300 monthly payment,” she says. “Paying that off is
a quick and easy way to increase how much you qualify for.”
Reducing credit card balances by using balance-transfer cards, refinancing
an auto loan to
lower the payment or consolidating debt into an installment loan also could
higher credit score helps you land not only a lower interest rate but also a
slightly larger loan, in many cases.
a higher credit score may allow you to qualify for a higher mortgage (amount),
but only to a certain extent,” says Matt Hackett, operations manager at Equity Now, a New York-based mortgage
boost your score, be sure to make all your payments on time, don’t max out the
credit you have and don’t apply for more credit while you’re trying to get a
your credit report and credit score for free at myBankrate.
Pay at least 20 percent down
you’re buying a home and your down payment is at least 20 percent of the
purchase price, you won’t have to pay for private mortgage insurance, or PMI. So,
you might be able to get a bigger loan.
which protects the lender if you stop paying on your loan, becomes part of your
monthly payment and can decrease the size of the loan you’re eligible for.
you still have cash available after you make a 20 percent down payment, you
could pay your lender more upfront — to buy down your interest rate.
only will you qualify for a higher loan amount, but you will save thousands of
dollars over time, too,” says Casey Fleming, a mortgage adviser at C2 Financial
Corp. in San Diego.
hybrid loan, such as a 7/1
adjustable-rate mortgage, or ARM, could enable you to borrow more
than a 30-year, fixed-rate loan.
7/1 ARM offers a fixed rate for the first seven years. After that, the rate
you feel comfortable with the interest-rate risk of an ARM, or if you plan to
sell your home or refinance your
mortgage before the seven-year mark, this option could help you get a lower interest rate and a
initial rate for an arm is usually 0.325 to 0.625 of a percentage point lower
than for a conventional 30-year fixed-rate loan, says Fleming.
Also, FHA loans,
insured by the Federal Housing Administration, and VA loans, which are guaranteed by the U.S.
Department of Veterans Affairs, have more flexible guidelines that could allow
you to borrow more.
By Marcie Geffner – To view the original article