How to Choose the Right Mortgage

It’s a sad fact, but nonetheless a fact, that house prices continue to rise and with the way things are going, they will probably continue to rise, putting many properties beyond the reach of many potential buyers. This situation has led to a lot of people finding it difficult to afford the home they’ve always wanted or even originally assumed they could afford.

Choosing the right mortgage for you can often mean digging around in your finances for anything that will extend your buying power. If you are being offered a sum by your lender you don’t think matches what you deserve, there are ways to boost your borrowing power and let you get that home you want and deserve. Read on to find out what these means are and how to implement them.

Do you have any debt?

A lender is going to look at your bank accounts and instantly spot any debt soaking up your monthly income. This will definitely hinder the size of the loan your lender can offer you. When you start applying for mortgages, lenders will look at your debt-to-income ratio (or DTI), which is the percentage of your monthly income you have to dedicate to your minimum monthly debts. A DTI ratio of less than 36 percent is usually considered ideal to lenders, but if you’re lucky, some will go higher.

But, if your debt is purged from your accounts, any lender will feel more comfortable lending to you, knowing that they will be your first priority for your monthly payments.

There are ways to get rid of debt. Credit and debit card debt can be eased with an installment loan to help you pay it off. This will likely result in a bigger offer for a mortgage since it will make a big difference in your DTI figure. If you have the money available, wiping your debt entirely as quickly as possible will make the size of your potential mortgage increase.

But you don’t need to get rid of it all in one go if you don’t have the funds available. You can also get a balance transfer card to reduce your debt or lower your payments by refinancing a vehicle loan.

Have you shopped around?

You don’t have to stick to the one lender and take what they offer you. Comparing the best mortgages by checking comparison websites and gaining quotes will pay off in the long run. If you get multiple preapprovals, you will suddenly find yourself with various options to choose from – all with different amounts.

You can also present your lender with your lower offers as pressure to up their offer. They might rethink the amount they have offered, which means you’ll go home with the biggest mortgage for the lowest price.

Have you got any additional income?

Any additional income can be presented to your lender to expand the amount your lender is willing to offer you. This shows you have backup funds available should something fall through and is proof that you can in fact pay your lender. But don’t go storming into the boss’s office for a higher salary, or to quit for a better paying job just yet – although it couldn’t hurt. But there are a lot of other ways you can prove additional income that you probably hadn’t even considered.

Make your lender aware of any proof of interest or dividends from investments. You can also show additional income from rental properties, child support, alimony, social security income and money earned from a part time job or business. The latter options, however, come with the caveat that you have to have been earning from the job or business for the last two years.

Have you got a co-borrower?

The logic is simple: if your lender trusts one person to pay back a mortgage, they will feel even more comfortable with two. A co-borrower with a steady income and good credit will go far in convincing a lender to up their offer. It shows that you will have various incomes covering the cost of the mortgage and proves that the financial burden won’t entirely be on one person, making payments smaller.

But the co-borrower needs to know what they are getting themselves in for. This isn’t a quick favor, but a financial agreement that they need to split the finances on, since their name will be on the property. A co-borrower can be a spouse, domestic partner, friend, or relative.