Debt to Income Ratio: What It Is and How It Affects Your Home Buying Power

When you apply for a mortgage, lenders don’t just look at your credit score—they check your debt to income ratio, a key financial metric that compares your monthly debt payments to your gross monthly income. Also known as DTI, it tells them if you can handle a new loan without drowning in bills. If your DTI is too high, you won’t qualify—even if you have a perfect credit history. It’s not about how much you earn, it’s about how much you already owe.

Most lenders want your DTI under 43%. That means for every $10,000 you make a year, you shouldn’t be paying more than $3,600 in debt each year—mortgage, car loans, student loans, credit cards, even alimony. Some banks will go up to 50%, but that’s risky territory. Your mortgage approval, the process of getting a home loan depends heavily on this number. Even if you have a down payment saved, a high DTI can still get you turned down. And it’s not just banks—landlords check it too when you rent. If you’re juggling credit card balances, student loans, or car payments, your DTI is silently working against you.

Your housing affordability, how much home you can realistically buy based on your income and debts isn’t just about the price tag. It’s about your monthly cash flow. A $500,000 home might look doable, but if you’re already paying $1,200 in car loans and $800 in student debt, that $2,500 mortgage payment could break you. That’s why experts say: don’t buy what you think you can afford. Buy what your DTI says you can handle.

Improving your DTI isn’t about making more money—it’s about paying down debt. Pay off a credit card. Consolidate loans. Skip that new car. Even small moves help. If you’re planning to buy in the next year, start tracking your DTI now. You’ll find out fast where you stand. And if you’re wondering why you keep getting denied for loans, this is likely the reason.

Below, you’ll find real examples of how people in different situations—renters, first-time buyers, investors—have been affected by their DTI. Some got approved. Others got stuck. Some changed their plans. All of them learned the hard way that your debt load matters more than your salary.