Debt-to-Income Ratio: The Number That Decides Your Mortgage Approval

Your debt-to-income ratio (DTI) is one of the most important — and most misunderstood — numbers in the mortgage process. It compares your total monthly debt payments to your gross monthly income, and lenders use it to gauge how comfortably you can take on a mortgage.

The math is straightforward. Add up your monthly debt obligations — credit cards, car loans, student loans, and the proposed new mortgage payment — and divide by your gross monthly income. If your monthly debts total $2,400 and you earn $7,000 per month, your DTI is roughly 34%.

Typical DTI thresholds:

• Below 36%: ideal, opens the widest range of loan options
• 36% to 43%: still approvable for most conventional loans
• 43% to 50%: possible with FHA or VA loans and strong compensating factors
• Above 50%: financing options narrow considerably

If your DTI is borderline, you have two main levers — increase income or decrease debt:

1. Pay down credit card balances aggressively before applying
2. Avoid new loans or financed purchases in the six months before applying
3. Pay off small installment loans completely to remove the monthly payment
4. Document side income — freelance, rental, or bonus income — if it can be verified

DTI isn’t a number you fix at the closing table. It’s one you shape in the months before applying, and small moves can meaningfully expand the loan amount you qualify for.