What exactly is DTI?
A simple way to think about DTI is like this:
Total monthly debt payments / gross monthly income = DTI percentage
Examples of monthly debts that could be included are:
- Car loans
- Student loans
- Credit card minimums
- Child support
Why DTI matters for homebuying
Lenders use DTI as a gauge of how comfortably you can take on a mortgage. A lower DTI signals you’re in a stronger position to manage a new payment without straining your monthly budget.
Meeting a lender’s preferred threshold often determines whether you qualify—and whether you could qualify for more competitive rates. Many conventional lenders prefer a back-end DTI at or below about 45%.
How to improve your DTI and boost your homebuying power
If your DTI is higher than you’d like, there are a few steps you can take:
- Pay down debt. Eliminating or reducing high-interest credit card balances can quickly improve your ratio.
- Avoid taking on new debt. Hold off on new car loans, large purchases, or financing agreements before you apply for a mortgage.
- Adjust your home search or timeline. If a certain price point pushes your DTI too high, consider more affordable options for now—or pause your search while you strengthen your financial profile.
Your DTI isn’t just a qualifying number; it’s a tool that helps you understand how prepared you are to take the next step toward homeownership. By managing your current debts, growing your income, and making strategic choices, you’re setting the stage for a smoother, more confident mortgage experience.
No matter where you are in your homebuying journey, a good first step is to become a PremierBuyer™.1 This offers a better idea of what you can afford and can help you look more attractive to sellers by proving you are both serious about a prospective purchase and likely to be able to financially follow through. Wintrust Mortgage offers an online application to become a PremierBuyer™ that’s fast, easy, and secure.
