What is considered debt when applying for a mortgage?

The first step in making your dream of homeownership a reality is applying for a mortgage. When you apply for a mortgage, your lender will determine how much money they can reasonably lend you based on your overall financial status. Your monthly debt payments are a large part of that picture.

Lenders generally consider all the debts listed on your credit reports from Experian™, Equifax^®and TransUnion^®. The payments on these debts will influence whether a lender chooses to approve a mortgage for you and how large a mortgage you can reasonably afford.

Your credit report shows these debts to lenders

Your lender will pull your credit report to get a snapshot of your debt payments. This will help them determine your debt-to-income ratio (DTI), which is the relationship between what you owe and what you earn, which factors into determining your creditworthiness.

Not all debts will appear on your credit report or impact your credit score, but most of the big ones will.

Rent or mortgage payments

For most of us, rent or mortgage payments usually top the list of the biggest monthly expenses. Whether it's a primary mortgage, a home equity loan, or some form of a second mortgage, this rings true.

Let's say you're applying for a new home loan. In this case, when figuring out your monthly debt, your mortgage lender will include any rent or mortgage payments that will continue after your home purchase in the amount of your monthly debts.

Alimony and child support payments

If you’re divorced or separated from a partner, you might receive monthly alimony or child support payments.

Lenders typically consider these payments as part of your monthly debt because you're legally required to make them each month, and they will continue once you have your new mortgage.

Loan payments

Mortgage lenders might also consider any other recurring loan payment as part of your monthly debt. This might include monthly payments you make on:

• Auto loans
• Student loans
• Home equity loans
• Home equity loans of credit (HELOCs)
• Personal loans
• Buy now, pay later (BNPL) loans

Credit card payments

Lenders will also look at your credit card debt. To figure out your monthly credit card debt, the lender will use the total minimum required payments you need to make monthly when they calculate your credit card debt.

Let's say you have three credit cards with the following minimum required payments:

• One card with a required minimum payment of $100
• A second credit card with a minimum payment of $50
• A third card with a minimum payment of $45

In this situation, your lender will determine that your monthly credit card debt is $195.

Calculating your debt-to-income ratio

When figuring out your DTI ratio, lenders will calculate your total monthly debt obligations. As we talked about, DTI ratio is a key factor in whether you qualify for a mortgage. The lender also uses this ratio to decide how much money they can reliably lend you to buy a house.

Most mortgage lenders want to see a DTI ratio of 36% or less, though many will accept as high as 43%.

To calculate your debt-to-income ratio:

1. Determine your gross monthly income. Your gross monthly income is the amount you earn before taxes are taken out. This can include other income payments in addition to your salary that come in each month such as disability payments, Social Security payments, and alimony payments.
2. Then determine your monthly debts. Add your total monthly debt payments together, including your estimated new mortgage payment. To calculate your DTI ratio, divide these debts into your gross monthly income.

An example of calculating DTI ratio

Say your gross monthly income is $7,000. You also have $1,000 in monthly debts, made up mostly of required credit card payments, a personal loan payment, and an auto loan payment.

You’re applying for a mortgage that comes with an estimated monthly payment of $2,000. This means lenders will consider your monthly debts to equal $3,000.

You would divide your monthly debts by your gross monthly income to find your DTI ratio.

Written out as an equation it would look like this:

3,000 (monthly debts and your estimated mortgage payment) ÷ 7,000 (gross monthly income) = 42% DTI ratio

You can reduce your DTI ratio by doing one of two things:

• Find ways to increase your gross monthly income by doing things like working more hours, asking for a raise or taking on a side hustle.
• Pay down your debts so your monthly loan or credit card obligations are less.

How can your debt affect getting a mortgage?

If your DTI ratio is too high, lenders might be reluctant to offer you a mortgage loan. It could look like you won’t have enough income to pay your monthly debts. In turn, this could boost the odds that you’ll fall behind on your mortgage payments.

If you have a higher DTI ratio, that also means that if you do quality for one of the many types of mortgages available, you’ll probably qualify for a lower loan amount. Again, this is because lenders don’t want to overburden you with too much debt.

When your DTI ratio is low, your chances of qualifying for a variety of loan types, a larger loan amount, and better loan terms all increase. It pays to take steps to lower your DTI ratio to get the best possible mortgage.

These loan types include conventional, FHA, VA, USDA, and jumbo loans.

• Conventional loans: These are loans originated by private mortgage lenders. The advantage of this kind of loan is that you might be able to land a conventional loan with a minimum down payment of just 3% of your home’s final purchase price. To get the lowest possible interest rate, you’ll need a strong credit score, usually 740 or higher.
• FHA loans: These are backed by the Federal Housing Administration (FHA). If your FICO^® credit score is at least 580, you’ll need a down payment of only 3.5% of your home’s final purchase price when you take out an FHA loan.
• VA loans: If you're a veteran or member of the U.S. military, or a widowed spouse of one who hasn’t remarried, this type of loan may be available to you. Insured by the U.S. Department of Veterans Affairs (VA), these loans don't require a down payment if you qualify. 
• USDA loans: Like VA loans, USDA loans also don't require a down payment. These loans are backed by the U.S. Department of Agriculture. To meet the criteria for this kind of loan, you’ll need to buy a home in a part of the country that's considered rural, per the USDA. As of right now, Rocket Mortgage® does not offer USDA loans.
• Jumbo loans: A jumbo loan is a loan for an amount too high to be guaranteed by Fannie Mae or Freddie Mac, two of the major government-sponsored enterprises (GSEs)

As of 2025, if you're borrowing more than $806,500, you'll need to apply for a jumbo loan. In high-cost areas of the country, such as Los Angeles and New York City, you'll need a jumbo loan if you're borrowing more than $1,209,750. Since these loans are larger and more expensive, you'll need a strong FICO^® credit score and need to meet the according income requirements to qualify for one of these loans.

FAQ

Here are answers to some of the most common questions about debt and qualifying for a mortgage.

How much debt can I have and still get a mortgage?

This depends on the lender and how they view your overall financial situation. Lenders typically prefer that your DTI ratio, which includes your estimated new monthly mortgage payment, not equal more than 3% of your gross monthly income, though some lenders will accept as high as 43%. Note that gross income means pre-tax income.

What’s not included in my debt-to-income ratio?

Your DTI ratio doesn’t fold in the following: your monthly rent payments (if they will end once you take on your mortgage and move into your new house), any outstanding medical debt you might owe, your cable bill, cell phone bill, utilities, car insurance, or health insurance.

What debt is included in my debt-to-income ratio?

Your DTI ratio typically includes monthly debts such as alimony, child support, mortgage loans, credit card debt, auto loans, student loans, and personal loans.

The bottom line: Know what factors affect your credit and DTI ratio

Your DTI ratio is a key number that you can influence. If you want to land a loan with great terms, it’s important to understand how this number looks to lenders. After you analyze your DTI ratio, you may want to take steps such as paying down debts or increasing your income to improve your chances of being approved for a mortgage.

The lower your DTI ratio the higher the odds of qualifying for the best mortgage. By understanding what exactly makes up monthly debt, you can make choices that help you qualify for the loan amount you want with the best interest rates and lowest terms.

Ready to make the move toward owning a home? You got this. You can start the approval process with Rocket Mortgage.