How Debt to Income Impacts a Borrower’s Ability to Qualify for a Mortgage

When applying for a conventional mortgage, your lender will want to get a complete picture of your financial qualifications. This usually includes your debt-to-income ratio, or DTI ratio. Today we’ll talk about how your DTI is calculated and how it can influence your creditworthiness, and ultimately, your ability to qualify for a mortgage.

What is DTI?

Your debt-to-income ratio, aka DTI ratio, is a percentage that reflects how much debt you have in relation to your income. You can calculate your DTI by dividing your monthly minimum debt payments by your monthly pre-tax income.

Here’s an example:

Rent: $900
Car payment: $300
Credit card payment: $150
Student loan payment: $250
___________________________
Total monthly minimum debt payments: $1600

Monthly pre-tax income: $3,000.00

1600/3000 = 0.53%

DTI: 0.53%

What’s a Good DTI for Getting a Mortgage?

Generally speaking, the lower your DTI ratio, the better. Most conventional loans have a maximum DTI between 40% – 50%. If you can keep your DTI on the lower side, you may be able to qualify for a lower interest rate. However, having a higher DTI doesn’t necessarily disqualify you for home financing.

There are some mortgage programs that allow for higher DTIs, and some may have no DTI requirements at all. These loans typically use the borrower’s other financial information to qualify, such as their bank statements, cash flow, or other assets.

Simple Access Loans

Simple Access™ Loans are a suite of specialty mortgages that may offer more flexible DTI requirements than what is available through conventional financing. Here are some of the Simple Access™ Loans currently offered through Luxury Mortgage (subject to change, please contact us for the most up-to-date information):

Investor Cash Flow Mortgage – No DTI verification for conforming loan amounts; 40% max DTI for jumbo amounts
Asset Qualifier Mortgage – No DTI verification for conforming loan amounts; 40% max DTI for jumbo amounts
Bank Statement Loan – DTI up to 50% for conforming loan amounts; 40% max DTI for jumbo amounts
1099 Only – DTI up to 50% for conforming loan amounts; 40% max DTI for jumbo loan amounts

The Investor Cash Flow Mortgage does not have a max DTI for conforming loan amounts. There is a max DTI of 40% for jumbo loan amounts. For real estate investors who plan to rent out the property and who do not have traditional sources of income or who may have trouble qualifying for a conventional loan, the Investor Cash Flow Mortgage may be ideal.

The Asset Qualifier Mortgage allows the borrower to use assets instead of income to qualify for the mortgage. This program has no DTI maximum for conforming loan amounts, and 40% for jumbo loan amounts. Borrowers who have significant assets but lack traditional income documentation may find this loan to be a great solution.

The Bank Statement Loan allows the borrower to use their bank statements to qualify for the loan instead of employment and income verification. This loan offers DTIs up to 50% for conforming loan amounts and up to 40% for jumbo loan amounts. If you’re self-employed, a freelancer, or contractor who is unable to provide traditional income documentation, this could be a great choice for your home financing needs.

The 1099 Only Mortgage may be ideal for any borrower whose income is primarily 1099 income. This could include freelancers, independent contractors, and sole proprietors. This loan program allows up to 50% DTI for conforming loan amounts and up to 40% for jumbo loan amounts.

Connect With Luxury Mortgage To Learn More

Give us a call toll-free at or connect with us electronically through our contact form. We’ll be happy to discuss your home financing needs and offer a no-obligation rate quote.