Been looking into financing my first rental property and keep seeing conflicting advice. Some folks swear by keeping your debts super low, even if your income isn't sky-high. Others say lenders mostly care about how much money you're bringing in each month, even if you've got some debt hanging around. I'm kinda stuck in the middle here—my income's decent but I've got a car loan and student loans still lingering around, you know? Curious what others think matters more to lenders, lower debt or higher income?
Honestly, lenders do care about both, but from what I've seen, debt-to-income ratio often weighs pretty heavily. You mentioned having a car loan and student loans—have you calculated your current DTI yet? I've worked with folks who had solid incomes but got tripped up because their monthly debt obligations were just too high. On the other hand, I've also seen people with modest incomes but minimal debt get approved fairly easily. It's tricky, because lenders want reassurance that you can comfortably handle another payment, even if your income looks great on paper. Have you considered running your numbers through a DTI calculator to see exactly where you stand? Might give you a clearer picture of how lenders will view your situation...
You're spot on about DTI being a big deal. I've seen lenders practically ignore high incomes if your debt load is already heavy. A buddy of mine had a great salary (seriously, made me jealous), but with a big car loan, credit cards, and student loans, he got shot down twice before finally getting approved after paying some stuff off.
If you're trying to boost your chances, here's what I'd suggest: first, nail down your exact monthly debt payments—everything from car to credit cards. Then divide that by your gross monthly income. If you're hovering around 40-45%, you're probably okay-ish but might get some pushback. Under 35% is usually a sweet spot from what I've seen.
But here's the kicker—sometimes lenders just have their quirks. Had a client with modest income and practically no debt sail right through, while another with higher income but slightly higher DTI got a rough ride. So don't get discouraged if you hit a snag... just focus on trimming debts as much as possible and maybe shop around a bit with different lenders.
"Under 35% is usually a sweet spot from what I've seen."
True, but honestly, I've seen lenders get pretty hung up on income stability too. Had a client with super low DTI but irregular freelance income—lenders weren't exactly thrilled. It's always something, right?
Both points made here are solid. From what I've seen, lenders tend to balance both debt and income pretty carefully, but honestly, the specifics depend a lot on the lender and your personal situation.
Had a client last year who was earning a pretty impressive salary—close to six figures—but had significant student loans and two car payments. On paper, his debt-to-income ratio looked okay (around 30%), but the lender still hesitated because of how much of his monthly income was already committed. They worried about how he'd handle an unexpected vacancy or major repair cost. Eventually, he got approved, but they asked for a bigger cash reserve upfront.
On the other hand, I worked with someone else whose income was moderate at best, but she had almost no debt at all—just a small credit card balance she paid off monthly. Her DTI was ridiculously low, something like 15%. The lender approved her loan faster than I've ever seen. They seemed reassured by the fact that even if her income wasn't huge, she had plenty of wiggle room in her budget each month.
I think stability matters more than people realize too. If you're salaried and have been at your job for several years, that's usually reassuring to lenders—even if your income isn't super high or you have some debt. But if you're self-employed or freelancing, as someone mentioned earlier, lenders might scrutinize your application more closely even if your numbers look good.
Bottom line: lenders want to feel confident you'll comfortably cover the mortgage payments plus unexpected costs. If your debts are manageable and your income stable enough to handle surprises, you're probably in decent shape—even if you're not perfect on either front.
