Lenders evaluate your total monthly debt obligations against your gross monthly income using what's called a debt-to-income ratio, or DTI. The most common benchmark is the 28/36 rule: your housing payment (including taxes, insurance, and any HOA dues) should stay below 28% of your gross income, while your total monthly debts, including the new mortgage, should stay below 36%. Conventional loans often allow up to 45% or even higher in some cases, while FHA loans have their own flexible thresholds. The exact number a lender accepts depends on the loan program, your credit score, and how much you have saved for a down payment and reserves.

Not all debt weighs the same in a lender's eyes. A car loan, student loan, or credit card balance all count toward your monthly obligations, even if the balances are small. Credit card minimums are calculated based on the highest balance across all your cards, which can surprise people who pay their cards in full each month. Student loans in deferment still get counted using a percentage of the balance. The good news is that some debts can be paid down or restructured before you apply, which can meaningfully shift your qualifying power.

In today's environment, with rates still elevated and home prices holding firm in most markets, the monthly payment on a given loan amount is higher than it was just a few years ago. That means the same DTI ratio covers less house than it used to. Buyers who would have comfortably qualified in a lower-rate environment may find themselves stretched at today's payment levels, even with the same income and debts. This is why getting prequalified before you fall in love with a listing matters more than ever. A quick review of your debts and income can tell you what you can actually afford, not just what a mortgage calculator suggests.