Mortgage rates have been bouncing around the low 6% range for well-qualified buyers, and that has plenty of Americans thinking about finally making a move.
But there's a number that matters just as much as the rate on the screen: your debt-to-income ratio.
Lenders use it to decide not just how much house you can afford, but whether you get approved at all.
Your DTI is all your monthly debt payments divided by your gross monthly income.
Add up your projected mortgage payment, car loans, student loans, minimum credit card payments, and personal loans.
Divide that by what you earn before taxes.
A $6,000 monthly income with $2,400 in total debt payments puts you at 40%.
Most conventional loans backed by Fannie Mae and Freddie Mac allow a DTI up to 45%, and some automated approvals stretch to 50% when you have strong credit and cash reserves.
FHA loans often go higher, sometimes to 57%, but that flexibility comes with mortgage insurance premiums that never fully go away.
Cross 43% on many loan types and you enter the zone where underwriters start asking hard questions.
What counts against you surprises people.
Student loans in deferment still count, usually at 1% of the balance or the scheduled payment, whichever is higher.
Minimum credit card payments count even if you pay the balance off monthly.
A cosigned loan for a family member counts too, whether or not they're actually paying it.
The fastest fix is paying down revolving debt before you apply.
Knocking $400 off your monthly minimum payments raises your borrowing power by tens of thousands of dollars at today's rates.
Paying off a car loan entirely can wipe out a payment that was dragging your ratio down for years.
Boosting income helps, but lenders want to see it documented.
A raise or a side gig that's been running for two years can count toward your qualifying income.
There's also a strategic move worth knowing.
If you're close to the line, a larger down payment doesn't fix DTI directly, but it lowers your monthly mortgage payment, which does.
Buying points to reduce your rate does the same thing.
So does choosing a cheaper home, which is why some buyers are looking one town over or at a smaller square footage instead of stretching.
One trap to avoid: don't open a new credit card or finance furniture for the new house between pre-approval and closing.
Lenders often recheck your credit and debt right before funding.
A new $200 monthly payment on a couch can blow up a deal that was already approved.
Get your numbers in order before you tour a single house.
Pull your credit report, list every monthly obligation, and run the division yourself.
A mortgage calculator gives you the payment, but only your full debt picture tells you whether a lender will say yes. **Our take:** DTI is the least glamorous part of buying a home, and it's the one that quietly kills the most deals.
Final Thoughts
Spend an afternoon on the math before you fall in love with a listing, because fixing your ratio takes months while falling for a house takes about ten minutes.