How to Improve Your Mortgage Options

Post by : Amy Sinden on 28.10.2021

Unfortunately, it’s well known to every one of us that house prices are rising and will probably continue to rise for the foreseeable future. This situation is making it more difficult than ever to buy a home and start your life.

If you’re faced with a lender who is offering you less than you expected, don’t be dismayed yet. There are a number of things you can do to boost your borrowing power and walk away with a bigger mortgage. Read on to find out our strategies for getting yourself a better mortgage and therefore a more valuable home.

Get rid of any debt

If you have any debt clogging up your account, your lender will spot it and it will hinder the size of the loan that is available to you. When you are applying for a mortgage, your lender will look at your debt-to-income ratio, or DTI, which is the percentage of your monthly income that you can dedicate to your minimum monthly debt payments. Lenders will usually consider a DTI ratio of less than 36 per cent, but there are some that will allow themselves to go higher. However, if you purge your debt, a lender will be more comfortable lending to you, content with knowing that you can repay without other past loans taking priority.

If you have any credit card debt, you can take out an instalment loan to help you pay it off. It will make a big difference in your DTI figure and help you gain a bigger mortgage. If you have the money handy, you can clear your debt entirely as a quick and easy way to increase how much of a mortgage you qualify for. But there are other options if you can’t pay it all off in one go. You can reduce your debt with a balance transfer card, or you can refinance a vehicle loan to lower your payments.

If you’re still having problems, you can consult accountants in Birmingham to help you shift any debt that you just can’t seem to get rid of.

Come armed with additional income

If you are gaining any additional income, make sure to make your lender aware of it. It can go a long way to getting you a bigger loan, since it is proof that you can repay your lender. However, you don’t need to demand a raise or go looking for a higher paying job, although that can only help. No, there are other ways you can be gaining additional income that you maybe assumed wouldn’t make a difference.

If you have any proof of interest or dividends from investments, show them. Other options considered additional income can be from rental properties, alimony or child support, social security income, and money earned from a part-time job or a side business. Although, the latter comes with the asterisk that says you have to have earned enough from your job or side business for more than the last two years.

Add a co-borrower

If one person can convince the bank that they can handle a mortgage, surely two can guarantee it. Adding a co-borrower with good credit and a steady income can go a long way to convincing a lender that there will be various incomes contributing to the mortgage. This proves that there will be a backup if something we to fall through and ensures that splitting the bill will be easier on you. Together, you and your co-borrower’s income will increase the total income that a lender can use to qualify you for a loan.

However, a co-borrower should be aware that this is a financial agreement, not a quick favour. Their name will be on the property, and they will have to split the finances. Co-borrowers can be spouses, domestic partners, friends, or relatives.

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