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Understand how your debt-to-income ratio affects your ability to qualify for a home loan in Nevada and strategies to improve your DTI
Your DTI ratio helps lenders evaluate your ability to manage monthly payments and repay borrowed money. A lower DTI indicates you have sufficient income to handle additional debt from a mortgage.
Most conventional loans require a DTI below 43% (50% with strong credit). FHA loans may accept up to 50-57% DTI with compensating factors. VA loans typically prefer under 41% but may go higher.
Front-end DTI only includes housing costs (PITI) and is typically capped at 28-31%. Back-end DTI includes all monthly debts and is the number most commonly referenced (43-50% max).
Eliminate small credit card balances and personal loans completely. Paying off a $200/month car payment reduces your DTI by 2-3% on a $60k income. Target debts you can fully eliminate within 3-6 months.
Adding documented side income, bonuses, or a raise lowers DTI. If you're getting a raise at work, wait 30 days with paystubs showing higher income before applying. Bonus/commission income requires 2-year history to count.
Consolidate high-interest debts or refinance your car loan to lower monthly payments. Extending a $400/month car payment to a longer term might reduce it to $280/month, immediately improving DTI by 2%.
Avoid buying a new car, furniture, or opening new credit cards for 6-12 months before applying for a mortgage. Every new monthly obligation raises your DTI and can disqualify you from loan approval.
Adding a spouse or co-borrower with income increases your total qualifying income while spreading debt across both parties. This can dramatically lower DTI if the co-borrower has minimal debts and strong income.
For student loans in forbearance, lenders may use 1% of balance as monthly payment for DTI. Switching to an income-driven repayment plan with documented lower payments can significantly reduce your calculated DTI.
Our Nevada mortgage specialists will analyze your complete financial picture and find the best loan program for your DTI situation - including manual underwriting and alternative documentation options
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Valley West Mortgage - NMLS #65506
Nevada Mortgage Lender License
Licensed to conduct business in Nevada
NMLS Consumer Access: www.nmlsconsumeraccess.org
We are an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Law and Equal Credit Opportunity Act. This company does not discriminate on the basis of race, color, religion, national origin, sex, marital status, age, or handicap.
This is not a commitment to lend. All loans subject to credit approval. Rates, terms, and conditions are subject to change without notice. Not all applicants will qualify. Additional restrictions may apply. Property insurance required. Flood insurance may be required. This website is for informational purposes only and does not constitute financial advice. Consult with a licensed loan officer for personalized guidance.