Q: How to increase the amount of home loan that I can borrow?
- Improve Your Credit Score
Your credit score is one of the most important factors that lenders consider when determining how much money you can borrow for a home loan. A higher credit score demonstrates to lenders that you are a responsible borrower and are more likely to repay your debts on time. To improve your credit score, you can pay your bills on time, reduce your credit card balances, and dispute any errors on your credit report.
- Reduce Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is another key factor that lenders consider when determining how much money you can borrow. This ratio compares your monthly debt payments to your monthly income. Ideally, your DTI ratio should be below 43%. To reduce your DTI ratio, you can pay off your debts, increase your income, or reduce your monthly expenses.
- Save for a Larger Deposit
The larger the deposit you can make on a home, the less money you will need to borrow from a lender. This can help increase the amount of money you can borrow, as lenders are more likely to approve larger loans to borrowers with larger deposits. Aim to save at least 20% of the purchase price of the home to maximize your borrowing capacity.
- Consider a Guarantor Loan
If you are struggling to borrow enough money for a home loan, you may want to consider a guarantor loan. This is where a family member or friend guarantees the loan and uses their own property as security. This can help increase the amount of money you can borrow, as lenders are more likely to approve loans with a guarantor.
- Consult with a Mortgage Broker
A mortgage broker can help you find a lender that is willing to lend you the maximum amount of money based on your financial situation. They can also help you understand the different options available to you, such as fixed or variable rate loans. A mortgage broker can also help you negotiate with lenders to secure the best possible deal.