How to qualify for a larger home loan
The reality of home shopping today leaves many potential buyers with sticker shock. While only a few years ago the average starter home was priced within the reach of many buyers that is not always the case today. While navigating the many pitfalls and roadblocks in the real estate market many potential buyers find themselves wishing they could qualify for a larger home loan. The first step is obviously to find out what you do qualify for and then go from there. And then before giving up you need to know that there are ways to qualify for a larger home loan. Here are just a few-
1. When looking at the final number given back to you in a pre approval from your lender consider the ways you could improve the factors that influence the bottom line. For example: look at your debt to income ratio. If your combined debt is higher than 36% your gross income consider ways to pay down debt and make your ratio better. Conversely look at improving your income. Will a different job or second job improve your income? It might be worth considering to improve this ratio. In addition look at what you are really trying to buy your housing cost should not exceed 28% of your gross income. Set your sights realistically.
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2. Another factor that will influence greatly how large a home loan you qualify for is your credit history. Before applying for a loan look at your credit. If there are mistakes or things that need to be cleared up do so before applying for your home loan. This will help improve your credit score and chances of being able to take out a larger home loan. There are many on line web sites that can help educate you in understanding and improving your credit history and score.
3. Consider making a larger down payment on your home. This will help improve your chances for qualifying for a larger loan. Any down payment over 20% of the purchase price of your home will help you qualify for a larger loan. If this is not possible consider submitting a "gift letter". This is a letter from a family member or friend who states they will be giving a sum of money for a down payment that does not need to be repaid. This letter will often be weighed in the financial calculation used in the final loan process.
4. See if you can use a co-signer in the loan process. Many banks and other lenders are willing to make a bigger home loan especially to first time buyers if there is a co-signer who is well established on the application. Be advised though that the co-signer must be willing to submit to the same intense scrutiny (credit check etc) as the original applicant will have to. Many lenders will deny an application for a home loan based on the co-signer if they do not meet the needed financial standards. So choose carefully when you ask someone to co-sign with you.
5. Be willing to accept non traditional means of financing. If you have your heart set on a certain amount to get into a home you may want to look at different loan types outside of a traditional 30-year fixed interest loan. While some of these types of loans can be risky they can provide the means to qualify for a larger home loan.
Finally in the home loan process prepare carefully, do your research and do not be afraid to shop around to get the best deal you can. If you are realistic in your goals and your home buying you may just be able to find that perfect loan to make that dream home a reality.
