How to Get Approved for a Higher Mortgage Loan in 2023

Getting approved for a mortgage can be an intimidating process. After all, it’s likely one of the largest loans you’ll ever take out in your life. The amount you get approved for determines the price range of houses you can consider and directly impacts your finances for years to come.

If you went through the pre-approval process and got approved for less than you were hoping for, don’t lose hope. There are several strategies you can try to get approved for a higher mortgage loan amount.

In this comprehensive guide I’ll walk you through 8 proven tips to increase your chances of getting approved for more mortgage financing, based on the latest expert advice from top lenders and my own experience going through the mortgage process.

1. Improve your credit score

Your credit score is one of the biggest factors lenders look at when determining your loan eligibility and interest rate. In general, the higher your score, the more likely you’ll be approved for a lower interest rate and higher loan amount.

Here are some ways to boost your credit score:

• Pay down balances – Keep credit card balances low, under 30% of the limit Pay down installment loan balances as well.

• Dispute errors – If you find mistakes on your credit report dispute them with the credit bureaus. This can improve your score.

• Become an authorized user – Ask a family member with good credit to add you as an authorized user on a credit card. This can give your score a boost.

• Limit hard inquiries – Each application for new credit results in a hard inquiry, which can lower your score temporarily. Limit applications unless necessary.

• Monitor your credit – Sign up for a free service like Credit Karma to monitor your credit and see what’s impacting your score.

Focus on improving your credit score in the months leading up to your mortgage application. Aim for at least a 740 FICO score or higher. This can make a big difference in the loan amount you qualify for.

2. Lower your debt-to-income ratio

Lenders also look at your debt-to-income (DTI) ratio when approving your loan. DTI compares your total monthly debt payments to your gross monthly income.

The lower your DTI ratio, the more mortgage you may qualify for. Here are some tips to lower your DTI:

• Pay off credit cards and other debts. This lowers your monthly payments.

• Try to pay down your auto loans. Even an extra $100 a month helps lower the balances.

• Refinance student loans on extended terms to lower monthly payments.

• Ask lenders to remove late payments that were paid off from your credit reports. This can help lower your DTI.

Ideally, you want your DTI to be below 36% to qualify for the maximum purchase price. Paying off debts is one of the most effective ways to lower your ratio and boost your mortgage eligibility.

3. Provide all sources of income

When applying for a mortgage, be sure to disclose all of your income sources, not just your main job. Lenders will consider part-time work, bonuses, commission, self-employment, Social Security benefits, pension payments, and more.

Providing documentation for these additional income streams can potentially help you qualify for a larger loan amount, as long as the extra income is stable.

Types of alternative income sources to consider including:

• Part-time or freelance work
• Bonuses and commissions
• Social Security or disability benefits
• Retirement/pension income
• Rental property income
• Child support/alimony

The key is proving this extra income will continue for the foreseeable future. Provide 2 years of documentation like tax returns, 1099s, and bank statements. The more you can verify, the better.

4. Make a larger down payment if possible

The down payment is the amount you pay upfront when purchasing a home. Putting down more upfront can allow you to qualify for a larger mortgage in two ways:

1. By lowering your loan-to-value (LTV) ratio – The more you put down, the lower this ratio goes. A lower LTV signals less risk for the lender so they may approve more.

2. By avoiding private mortgage insurance (PMI) – On conventional loans, PMI is required if you put down less than 20%. This adds to your monthly payment. Putting at least 20% down avoids it.

Saving for a down payment takes discipline and time. But the larger you can make that down payment, the more purchasing power you’ll have when applying for a mortgage.

Putting 20% down is ideal, but even an extra 3-5% over what you originally planned can make a difference in how much home you can buy.

5. Choose a longer mortgage term

First-time home buyers often opt for a 30-year mortgage term without considering other options. But switching to a longer term could mean a higher approved loan amount.

Benefits of going with a longer term:

• Lower monthly mortgage payments
• Allows borrowing more on purchase price

For example, switching from a 30 to 40-year mortgage term can reduce your monthly payments by several hundred dollars. Lenders see you have more room in your budget to take on higher mortgage payments.

Just keep in mind that longer terms have higher interest costs over the life of the loan. But in the short run, they allow you to qualify for more.

6. Bring in a co-signer

If your credit or income are lacking, another option is bringing in a co-signer with stronger finances to apply for the mortgage with you. This gives lenders more confidence in your ability to repay and may result in loan approval where you would have been denied on your own.

However, co-signing comes with serious drawbacks:

• Co-signer is equally responsible for repaying mortgage
• Late or missed payments affect co-signer’s credit too
• Co-signer’s finances and assets can be pursued in event of default

Because of these risks, it can be difficult to find someone willing to co-sign. Approach close family members first. Make your case for why you’re a good credit risk. Offer to add them to the home’s title for additional protection.

Co-signing should be a last resort, but can help you cross the threshold for approval if used carefully.

7. Provide assets and reserves

Lenders want to see you have adequate savings and assets to cover mortgage payments if your income was disrupted. Reserves requirements vary by lender but typically range from 6-24 months of mortgage payments.

The more assets and reserves you can show on your application, the more secure a lender feels in approving you for a higher amount.

Be prepared to provide current bank/investment statements proving you have:

• Sufficient funds for down payment and closing costs
• 6-12 months of mortgage payments in liquid savings
• Retirement accounts with balances that won’t be touched

The other benefit of having ample assets is that you can use them to pay down debts quickly before applying. This further strengthens your application.

8. Choose the right lender

All lenders have their own requirements and flexibilities when approving borrowers. One may approve you for $300k based on your application while another approves you for $350k.

Mortgages fall into two main categories:

Conventional loans – Offered by private lenders like banks and credit unions. Require higher credit scores but offer lower rates.

Government-backed loans – Offered by lenders but insured by FHA, USDA, or VA. Open to lower credit borrowers but rates can be higher.

To maximize your chances for approval, apply with multiple types of lenders:

• Compare at least 3 quotes from conventional lenders
• Get quotes from lenders offering government-backed loans
• Consider online lenders for fast approvals

Applying strategically with the right mix of lenders for your situation can help unlock the most mortgage financing.

Final Tips for Getting Approved

Here are a few final tips when applying for a mortgage to boost your approval odds:

• Pay all bills on time leading up to your application
• Avoid new credit card or loan applications while applying
• Explain any red flags on your application like late payments
• Ask lenders what else you can provide to get approved
• Appeal any denial letters and ask lenders to reconsider

With persistence and a strategic approach, you can get approved for the maximum home loan amount possible given your financial situation. Just focus on bettering your credit, lowering debts, and enhancing assets – the building blocks for loan approval.