The Hidden Debts That Could Be Blocking Your Mortgage Approval
Andrea thought she was in great shape to buy a home. Her credit score was solid, she had no late payments, and her only obvious debt was a car payment. So when her mortgage application hit a wall, she was confused. Nothing on her report looked bad. So what was the problem?
The problem wasn't her credit score at all. It was her debt-to-income ratio, and the obligations feeding into it that she never thought to count.
Your Score Is Not the Whole Story
Most buyers assume that a good credit score means they are in good shape to qualify. A score reflects your payment history and how you have managed credit over time. But lenders use a separate calculation to decide how much you can actually afford: your debt-to-income ratio, or DTI. This ratio compares your monthly income to your monthly debt obligations, and it is one of the most common reasons a qualified-looking buyer gets declined.
The Debts People Forget to Count
A situation that comes up often is a buyer who lists their credit cards and car loan, but leaves out debts that still count on paper. These include co-signed loans, even when someone else is making the payments. Buy-now-pay-later plans that report a monthly minimum. Old collection accounts that were never resolved. And student loans currently in deferment, which lenders may still count using a calculated payment. None of these show up as red flags on a credit score the way a late payment does, but every one of them adds to the monthly obligation side of the DTI calculation.
What We Did for Andrea
Before Andrea ever submitted an application, we sat down with her full credit report and listed every single account carrying a monthly payment, not just the obvious ones. Once we had the complete list, we calculated her real debt-to-income ratio and compared it against her income. That process surfaced the one account that was quietly skewing her numbers, an obligation she had genuinely forgotten was still reporting. With that identified, we could build a plan around it before it became a surprise denial later in the process.
What You Can Do Today
Pull your own credit report and go through it line by line. For every account, note whether there is a monthly payment attached, even if you personally never make that payment or the account is in deferment. Add those payments up and compare the total against your gross monthly income. That rough math will give you a much clearer picture of where you stand than your credit score alone ever will.
The Local Picture
Here in the Charleston area, I see this pattern regularly with buyers who assume their score tells the whole story. It does not. The math behind your ratio is what determines how much home you can actually qualify for, and it is worth understanding before you start shopping, not after an offer falls through.
If you are not sure what is really on your credit report or how it is affecting your ability to qualify, I am happy to look at your full picture with you before you apply anywhere.
Jason Sharon, licensed mortgage broker with Home Loans Inc, can be reached at 843-569-7283. Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448.