What Do Lenders Consider When It Comes to Mortgages?
Lenders have to balance their risk with their reward when it comes to offering mortgages to would-be home buyers. In this context, risk means the chance that their client will default on their outstanding balance, instead of honoring it in full. Whereas reward means the profit that the lender can expect to make on the interest charged on the principal. In general, lenders tend to make their lending decisions based on a combination of the client’s ability to pay and the client’s willingness to pay- they also may use their credit score to gauge whether they meet said criteria or not.
How Can You Borrow More On Your Mortgage?
All prospective home buyers seeking to finance a home purchase should consult with a qualified mortgage professional. He or she may offer some simple things that one can do in order to borrow more on their mortgage:
- Raising your credit score is the simplest and most straightforward method for becoming able to borrow more on your mortgage, because it is the single measurement of creditworthiness that sees the most use. Generally speaking, a borrower should be able to raise their credit score by making your payments on time and paying down outstanding balances while making use of a wide range of financial products. However, make sure to keep your accounts open even after outstanding balances have been paid because if you close them, you lose the credit histories that go with them.
- If you make frequent use of financial products, consider reducing your outstanding balances before applying for a mortgage. This is because the higher the ratio of debt obligations to income in each month, the higher the chance of default. This, in turn, means increased incentive for a lender to lower their exposure to risk by lending a smaller amount of money. By reducing your debt obligations in each month, you can make it clear that you can handle the burden of the additional debt that you are asking to take on.
- On a related note, there are other ways to improve the ratio of your debt obligations to your income in each month other than reducing the size of your debt obligations. For example, if you can increase your income on a permanent basis, that should have the same effect on your lender.
- There are other ways to increase the amount that can be borrowed in a mortgage by reducing the risk for the lender. One particularly common example is asking someone else to co-sign the mortgage, which means that they will be held responsible for the outstanding balance if you default on your debt obligations. That said, this avenue is only effective if the co-signer is considered to be creditworthy, so choose carefully.
Get in Touch
Just because you can borrow more doesn’t mean that you should do so. If you want to consult with someone about what kind of home you can afford, speak with a qualified mortgage professional. After that, you will be in a better position to determine what kind of home you want. That is when you should contact a trusted real estate agent such as John Seggerman, who is qualified to give advice that comes from years of experience handling dozens of transactions.