A bigger mortgage may not always be the most financially prudent decision. Factors that a lender considers while giving a loan are as follows:
Stable Income: Most lenders will look at your income over a certain period of time. They are more interested in looking at your stable income. For salaried personnel, this could mean their fixed salary and bonuses if these are stable in nature. For the self-employed ones, the bankers will scrutinize the tax returns over a period of time to find out the stable income. Most lenders have a maximum lending limit that is a percentage of this stable income. The larger your stable income, the larger mortgage you can avail.
Cut Down On Additional Debt: Lenders will look at the free cash flow that you have. They call it your disposable income. Every small loan that you take cuts down your free cash-flow. So, the car loan and the vacation loan all act against your ability to take a bigger mortgage. If you are in a position to pay them off in full, please do the same to increase your borrowing ability.
Clean Credit Score: A good credit score improves your chances of getting a bigger mortgage. The formula that calculates the maximum possible borrowing also considers your credit-worthiness. Ensure that you pay your bills on time. Credit scores are not built overnight.
Bigger Down Payment: A bigger down payment reduces the risk of the lender. It also means that you have been prudent enough to save money to make the payment. Most borrowers will finance a bigger loan in the Loan to Value ratio (LTV) ratio.