Mortgage rates have cooled from their 2023 peaks, and plenty of buyers are tiptoeing back into the market.
But there's a number that matters more than the rate you see advertised: your debt-to-income ratio.
It's the figure lenders run before they ever talk about your interest rate, and it sinks more applications than most buyers realize.
Add up your monthly debt payments — car loans, student loans, minimum credit card payments, rent or a current mortgage — then divide by your gross monthly income.
If you bring in $6,000 a month and your debts total $2,400, your DTI is 40%.
Most conventional lenders want that number at or below 36%, though many will stretch to 43% and some government-backed loans go higher.
Cross the line and you're looking at a denial, a smaller loan than you hoped for, or a higher rate to offset the risk.
Lenders count the minimum payment on your credit cards, not your actual balance.
Someone carrying $12,000 across three cards might only owe $300 a month on paper — but that still eats into the ratio.
Paying down a card can improve your DTI faster than almost anything else.
First, pay off or pay down revolving debt before you apply, since credit cards carry the heaviest weight.
Second, avoid taking on new loans — a car note or a financed couch — in the six months before you shop for a mortgage.
Lenders pull your credit and recalculate.
If your DTI is already tight, consider adding a co-borrower with steady income, or making a larger down payment to shrink the loan amount.
Both can pull the ratio back into range without a six-figure salary.
One catch worth knowing: DTI isn't the only gate.
Lenders also weigh your credit score, savings, and employment history.
A strong score can sometimes offset a slightly high ratio, but it won't erase a 50% DTI.
THE TAKEAWAY: Before you fall in love with a listing or lock a rate, run your own DTI.
It takes five minutes and tells you what you can realistically afford — not what a lender's ad suggests.
Final Thoughts
Knowing the number ahead of time puts you in control instead of waiting on a rejection letter.