
Your DTI includes monthly obligations like mortgages, loans, credit card minimums, and more. Understanding these can boost your buying power.
What Counts as Debt for DTI? Discover the Keys to Mortgage Success
Your debt-to-income ratio (DTI) plays a massive role in the homebuying journey. 📉 Lenders use it to measure your ability to manage monthly payments and repay borrowed money. But what counts as debt for DTI? That’s the million-dollar question—and one you absolutely need to understand if you’re planning to purchase a home.
In simple terms, DTI compares your monthly debt obligations to your gross monthly income. The lower your DTI, the better your chances of mortgage approval and favorable interest rates. But knowing exactly what counts toward this figure can empower you to reduce unnecessary debt, strengthen your finances, and unlock more buying power.
Breaking Down DTI: What Lenders Actually Count as Debt
Based on the visual provided, your DTI includes several core monthly financial obligations:
Housing Costs
This includes your rent or mortgage payment, including principal, interest, taxes, insurance, and association dues (PITIA). These costs often make up the largest portion of your DTI.
Loans & Debts
Car loans, student loans, and any other existing mortgages fall under this category. Even if the debt is deferred or on forbearance, it may still be counted.
Credit Cards & Leases
Only minimum payments on your credit cards count—not your entire balance. Lease agreements, such as car or equipment leases, are also included in your DTI.
Court-Ordered Payments
Payments like alimony or child support are part of your financial obligations and are considered in your DTI calculations.
Other Obligations
This includes personal loans, net rental property losses, or any other consistent monthly payments that aren’t optional.
Knowing this list helps you make smarter choices about which debts to tackle first.
Why Your DTI Matters When Buying a Home
Mortgage lenders typically look for a DTI below 43%, though some programs may allow higher ratios with compensating factors. A lower DTI not only increases your chance of approval but may also help you secure a better rate, increasing your affordability and monthly savings.
How to Improve Your DTI
Pay down credit card balances. Avoid taking on new debt before applying. Refinance or consolidate loans. Increase your income with a side hustle or higher-paying job.
Need help reviewing your financial picture? 📲 Let’s connect to review your numbers and build a plan to help you become a confident and prepared homebuyer.
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