Hot take: Your credit score isn't as important as your debt-to-income ratio when getting a mortgage

I just got pre-approved last week with a 720 score, but my buddy with a 780 was denied. Turns out the lender in Denver cared way more that his car payment and student loans ate up 52% of his monthly income. Mine was at 38% and they barely asked about the score. Has anyone else run into this where the DTI ratio mattered more than the number on your credit report?

2 comments

2 Comments

mason2834d ago

Swapped my whole mindset on this after watching my cousin get denied with a 770 score and no late payments ever. The bank said his DTI was at 49% and they just wouldn't budge. I used to think having a good credit score was the golden ticket, but now I see it's really just one piece of the puzzle. Lenders seem to care way more about whether you can actually make the monthly payment without stretching too thin. Your buddy's case sounds pretty typical for these tougher lenders they're getting stricter about the DTI threshold. It's a hard lesson to learn but definitely makes you look at your finances different.

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cameron_chen634d ago

@mason283 I get what you're saying about DTI being a big deal, but I think a 770 score is actually part of why they denied him. Banks see that high of a score and figure you know what you're doing, so they hold you to a stricter standard. At 49% DTI, they probably figured he could afford to pay down some debt first. I've seen people with 680 scores get approved at 45% DTI because the bank assumes they're more of a risk taker and easier to lend to. It's weird how that works.