When you sit down with a lender to get a mortgage, they are not just looking at your credit score or your bank account. They are looking at a number that tells them whether you can actually handle the monthly payment on top of everything else you owe. That number is your debt-to-income ratio, often shortened to DTI. It sounds fancy, but it’s really just a simple math problem: how much of your monthly gross income goes toward paying debts. If that percentage gets too high, you will have a very hard time getting approved for a home loan, no matter how good your credit is. The good news? You can do something about it before you ever step into a lender’s office.
First, you need to know what counts as a debt. Lenders look at your monthly obligations like car payments, student loans, credit card minimums, personal loans, and any other recurring payments that show up on your credit report. Things like your phone bill, gym membership, or utility bills usually don’t count, unless they’re seriously past due. They also look at your gross income—that’s what you make before taxes. For most people, the magic number to aim for is 36% or lower. That means all your debts plus your new mortgage payment should take up no more than 36 cents of every dollar you earn. Some lenders allow up to 43%, but the lower you go, the better your interest rate and the easier it is to say yes.
So how do you actually bring that number down? The most obvious way is to pay off debt, but you don’t have to wipe out everything. Start with the small balances. That credit card you owe $500 on? Knock it out. That personal loan you’ve been dragging along for years? Throw a few extra hundred bucks at it. Every minimum payment you eliminate drops your monthly obligations, which automatically lowers your DTI. Even paying off one small account can make a real difference if your income is tight.
Another move is to stop taking on new debt, especially in the months before you apply. That “zero percent financing” on a new couch might seem harmless, but it adds a payment that counts against you. Same with a new car, a boat, or even a big furniture purchase on a store card. Lenders want to see stability. If you’re planning to buy a house within the next six months to a year, the best thing you can do is keep your credit profile exactly as it is—just make your regular payments on time and don’t add new obligations.
Of course, you can also work the other side of the equation. Increasing your income lowers your DTI because the denominator gets bigger. Take on a part-time gig, freelance on the weekends, or ask for a raise that you’ve earned. Lenders will use your current sustainable income, so a temporary side hustle might not help unless you’ve been doing it for at least two years. But a regular salary bump or a new full-time job with higher pay counts immediately. Just be careful not to change jobs right before applying, because lenders like to see two years of steady employment.
One mistake people often make is closing old credit cards to “look cleaner” on paper. Don’t do that. Closing a card reduces your total available credit, which can hurt your score, and it does nothing to help your DTI unless that card has a balance you’re paying on. Actually, the minimum payment on a card with zero balance is not counted. So leave the cards open and keep balances low or zero.
If your DTI is still too high after all that, consider a co-borrower. Adding a spouse, a family member, or a trusted partner with good income and low debt can bring the combined ratio into range. Just understand that co-borrowing means that person is equally responsible for the mortgage, and it affects their credit and finances too. That’s a serious commitment, not a casual favor.
Finally, remember that timing matters. If you’ve already paid off some debts, wait a few weeks for the balances to report to the credit bureaus and for your lender to see the updated numbers. Don’t rush your application the day after you make a big payment. And don’t go out and open a new credit card to get rewards on your down payment—that new inquiry and potential balance will work against you.
The whole point of your DTI is to keep you from getting in over your head. Lenders aren’t trying to be tough on you for no reason. They want to make sure you can handle your mortgage even when life throws surprises like a broken water heater or a sick pet. So be honest with yourself, do the math, and take the steps that make that number look as healthy as possible. It’s one of the few things in the homebuying process that you have real control over. Use it.
