If you’re thinking about buying a home in San Diego and want to put yourself in the strongest position possible before applying, I want to let you in on one of the most powerful (yet overlooked) parts of the pre-approval puzzle: your debt-to-income ratio, or DTI. I’m Trevor Sanders, owner of SD-Loans.
As a mortgage broker in San Diego, I help everyday San Diegans like you turn “maybe someday” into “we just closed!”—and one of the first things I look at when you apply for a mortgage is your DTI. Don’t worry—if that sounds like mortgage lingo overload, I’ll break it all down right here. By the end of this post, you’ll know exactly what lenders are looking for and how to improve your DTI before you apply.
Related post: The Impact of Credit Scores on San Diego Home Loans: How to Improve Your Score for Better Financing
🔍 What Is a Debt-to-Income Ratio (DTI)?
Let’s keep it simple: your DTI is a percentage that compares your monthly debt payments to your monthly gross income. I like to call it your Capacity!
So if you make $6,000/month and your debts (credit cards, student loans, car payments, etc.) total $2,000/month, your DTI is 33%.
🏡 Why Does This Matter to Lenders?
Because your DTI gives lenders a snapshot of how comfortably you can take on a mortgage. It’s one thing to qualify on paper—it’s another to afford the payment in real life. Lenders want to make sure you’re not stretching too thin.
🎯What’s a Good DTI for Mortgage Approval?
This can vary by loan type, but here’s a general breakdown:
- Conventional Loans: Aim for 43% or lower
- FHA Loans: Often allow up to 50%
- Ideal Target: Below 36% gives you the most breathing room
And here’s where the strategy comes in: the lower your DTI, the stronger your application, the more loan options you’ll qualify for, and the better your interest rate might be.
📈 How to Improve Your DTI Before You Apply
This is the part where we take control. Improving your DTI isn’t just about cutting expenses—it’s about making strategic, timely moves. Here’s how we do it.
💳 1. Pay Down Revolving Debt
Credit cards are one of the fastest ways to drop your DTI. Even knocking down a few thousand dollars can make a noticeable difference in your qualifying numbers.
Quick Win Tip:
Target your highest-interest card first, or the one with the highest balance relative to its limit.
🚗 2. Refinance or Consolidate Other Debts
Got a car loan, personal loan, or student loans with high monthly payments? Sometimes refinancing to a lower rate or longer term can reduce your monthly obligation—and lower your DTI.
Heads up:
Don’t do this without talking to a mortgage pro first. Sometimes extending terms can hurt your overall financial picture if not handled strategically.
Related post: Mortgage Options for Self-Employed Homebuyers in San Diego: What You Need to Know
📅 3. Hold Off on New Debt
Thinking about financing new furniture, opening a new credit card, or buying a car before you buy a house? Hit the brakes.
Even if those payments seem small, they can bump your DTI just enough to change what you qualify for—or worse, cause a denial.
👨💼 4. Increase Your Income (Yes, It Counts!)
DTI is a ratio, remember? So increasing the income side of the equation works just as well. Side gigs, bonuses, commissions—some of that may count toward qualifying.
Important:
Most lenders want to see at least two years of consistent income from side jobs. But every situation is unique, so let’s chat and review what counts.
🧾 5. Don’t Co-Sign for Anyone (Yet)
Co-signing for someone else’s loan might seem like a favor, but it can hurt your DTI even if you’re not the one making payments.
If it shows up on your credit report, it counts against you—plain and simple.
📝 Preparing for Pre-Approval with a Clean DTI
Here’s how to show up ready:
- Tally your monthly obligations that would show on your credit report
- Organize your pay stubs, tax returns, and any side income records
- Set a DTI goal of 36% or lower, and work backwards to see what needs adjusting
If you want help walking through this, I’m just a message away. I’ll show you how to prep your finances so your pre-approval flies through.
💬 Let’s Make Your Numbers Work FOR You
When we work together at SD-Loans, we create a game plan that’s custom to your life. I’m not here to throw numbers at you—I’m here to help make those numbers work in your favor so you can buy with confidence.
Getting your debt-to-income ratio in a healthy range isn’t about being perfect—it’s about being proactive.
You deserve the best shot at buying your dream home in San Diego, and I’m here to make that happen.
Text me at SD-Loans to create your custom plan: 619-855-5061.
Keys In Hand, New Chapter Unlocked 🔑
