You Don’t Need to Be Debt-Free to Buy a Home: Why a 45% DTI Still Works

“Every homebuyer deserves more than just a rate—they deserve clarity, confidence, and a roadmap that respects their goals.” — Stephen Savant, CEO of Savant Mortgages

What Is Debt-to-Income Ratio (DTI)?

Your debt-to-income ratio (DTI) is a key metric lenders use to evaluate your ability to manage monthly payments. It’s calculated by dividing your total monthly debt payments by your gross monthly income.

For example, if you earn $6,000/month and pay $2,400 toward debts (credit cards, auto loans, student loans, etc.), your DTI is 40%.

Most conventional lenders allow a DTI of up to 45%, and some programs, like FHA loans, may even go higher depending on compensating factors like credit score or cash reserves.

Contrary to popular belief, you don’t need to be debt-free to qualify for a mortgage. In fact, many buyers successfully close with a DTI in the 40–45% range. Here’s why:

Lenders look at the full picture—not just your debt, but your income stability, credit score, and assets.

Automated underwriting systems used by lenders often approve higher DTIs if other factors are strong.

Loan programs vary—FHA, VA, and USDA loans may allow more flexibility than conventional loans.

What Counts Toward Your DTI?

Your DTI includes:

• Minimum monthly payments on credit cards

• Auto loans and leases

• Student loans

• Personal loans

• Existing mortgage or rent

• Alimony or child support (if applicable)

It does not include utilities, groceries, or discretionary spending.

How to Improve Your DTI Before Applying

If your DTI is above 45%, here are smart ways to improve it:

• Pay down high-interest credit cards

• Refinance or consolidate loans to lower monthly payments

• Increase your income through side gigs or bonuses

• Avoid taking on new debt before applying

🏡 Bottom Line: You Can Still Qualify

A higher DTI doesn’t mean you’re out of the running, it means you need the right lender, the right loan product, and a smart strategy. We specialize in helping buyers navigate these nuances and find a path to approval that works for their unique financial picture.

Ready to see where you stand? Book a free consultation with us and let’s build your homeownership plan!