Mortgage lenders are tightening the screws in 2025, and the number sitting at the center of most rejections isn't your credit score.
It's your debt-to-income ratio, or DTI — the percentage of your monthly gross income that goes toward debt payments.
Cross the wrong threshold, and a perfectly good borrower can get turned down.
Add up your minimum monthly payments on credit cards, car loans, student loans, and any other installment debt.
Then add the estimated mortgage payment you're applying for, including principal, interest, taxes, and insurance.
Divide that total by your gross monthly income before taxes.
Most conventional loans sold to Fannie Mae and Freddie Mac cap DTI at 45%, though some buyers get approved up to 50% with extra cash reserves or strong credit.
FHA loans have historically allowed up to 43%, and some lenders stretch to 50% with compensating factors.
Above 50%, you're in thin territory — the kind where a single surprise expense can knock a payment off the rails.
The catch is that lenders count student loans even when you're on an income-driven repayment plan.
Many now use 1% of the outstanding balance as the monthly figure, not your actual payment, which can be far lower.
A $40,000 student loan balance can suddenly look like a $400 monthly obligation on paper.
Minimum payments on a $10,000 balance run about $250 a month at today's rates.
Pay that down to $3,000 before applying, and you free up roughly $175 in monthly debt — which could raise your borrowing power by tens of thousands of dollars.
If your DTI is already too high, a few moves can help.
Paying off a small car loan or a store card outright removes the entire payment from the calculation, even if the balance was modest.
Adding a co-borrower with clean finances can also pull you under the line.
One more thing: don't open new credit or finance a car between pre-approval and closing.
Lenders often recheck your file, and a fresh loan can push your DTI over the limit days before you sign. **The bottom line:** Your DTI is a moving target you can actually control before you apply.
Final Thoughts
Knock down revolving balances and question how your student loans are being counted — those two steps alone can shift a rejection into an approval.