With the credit crunch, many lenders have tightened up their lending guidelines.  Many borrowers are finding out that they no longer qualify for the same amount they did last year even with lower interest rates.  Here are a few tips on increasing the amount you get pre-qualified to purchase:

1. Choose the right lender – there are conservative lenders and there are aggressive lenders.  All lenders have consistent standard debt service ratio policies – That is, you are allowed to spend up to a certain percentage of your gross income on mortgage payments.  Some lenders allow you to spend only 32% of your gross income on housing payments while others allow you to spend up to 44% of your gross income.  This can result in a significant difference.  For example, a couple with a combined income of $60,000 and no debt can qualify for $265,000 with one lender and $390,000 at another lender.
2. Ensure your credit is in great shape – Your lending limits will depend on your credit.  With a credit score of 680, some lenders will allow you spend up to 44% of your gross income on housing payments.
3. Pay off all other debts (or reduce payments payments) – Every dollar you are required to pay towards other debts (e.g., car loans, credit cards payment, personal loans) reduces the amount you can use towards your mortgage.
4. Find a property with a mortgage helper – Rental income from a basement suite can significantly boost the amount of money you qualify for.  This will also depend on how your lender treats income from rental properties.
5. Use a mortgage broker – You can spend your time going from one lender to another checking your qualification limits or you could go to a person who can tell who which lender will be inclined to provide you with the right product for you.  The only one that can do this is a professional mortgage broker – Your bank cannot offer the wide variety of products and options that  a mortgage broker can provide.

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