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How Much Credit Card Debt is Okay When Buying a Home?

by Jesse Campbell on
11/9/2025
in Repaying Debt , Housing and Homeownership
Happy family standing outside their new home.

The following is for informational purposes only and is not intended as credit repair.

So, you’re thinking of buying a home, but you have some credit card debt. How will that debt affect your mortgage application process? There are a few things you’ll want to consider before filling out your first application that can make the process a little easier.

What's the debt-to-income ratio threshold for home loans?

The first thing you need to know is your debt-to-income ratio (DTI). This is your monthly debt payments (all of them) divided by your gross monthly income. It's one of the key number lenders will use to determine your ability to manage your monthly payments. A 45% DTI is about the highest ratio you can have and still qualify for a mortgage.

Based on your debt-to-income ratio, you can now determine what kind of mortgage will be best for you.

  • FHA loans usually require your ratio (including your proposed new mortgage payment) to be 43% or less.
  • USDA loans require a DTI of 41% or less.
  • Conventional mortgages usually require a debt-to-income ratio of 45% or less although you may be able to get approved with a ratio of up to 49.9% under very select circumstances.

How much credit card debt is too much to qualify for a mortgage?

To understand if whether or not your credit card debt may impact your ability to secure a mortgage, you have to know three things: 

  • Your monthly minimum debt payments
  • Your proposed monthly mortgage payment
  • Your gross annual income (divided by 12 to get your gross monthly income)

Your monthly minimum debt payments include car loans, student loans, personal loans, and credit cards. Add up the minimum owed on all of these types of accounts to get your total.

Your monthly mortgage payment requires a little math and a little guesswork. For the sake of the exercise we'll use the Mortgage Calculator at calculator.net and assume an interest rate of 6.22%, which is the national average for a 30-year fixed-rate mortgage, according to Freddie Mac.

  • Home price: $400,000
  • Down payment: $80,000 (20%)
  • Loan amount: $320,000
  • Monthly payment: $1,964.06

The median gross household income for American families in 2024 was $83,730, according to the Census Bureau. That gives us a monthly income of $6,977.50.

In this scenario, the maximum monthly debt payment you could have and still qualify for a conventional mortgage (with a 45% DTI cap) is $1,176. And remember, that includes your car payment, student loans, and credit cards. To get your credit card-specific number, you'll need subtract all of your other debt payments.

  • Mortgage payment ($1,964) + Debt payments ($1,176) = $3,140 total debt payment
  • Total debt payment ($3,140) ÷ Gross monthly income ($6,977.50) = 45% 

How to improve your odds with mortgage lenders

To improve your chances of getting a mortgage, or even just getting a better interest rate, there are a few things you can do.

A lender may even ask you to roll your debt into your mortgage. This will reduce your overall debt-to-income ratio and possibly even lower your interest rate, but keep mind that your new home will now be collateral for that debt and defaulting on it could mean foreclosure. If a lender does ask you to do this, you may want to take some time to think about it and determine if you can hold off on getting a mortgage until you’ve paid down your debt.

One last factor to keep in mind is your credit-utilization ratio. Essentially it means the amount of available credit you have compared to what you owe. For instance, if one of your credit cards has a $10,000 limit and you only owe $500, you have $9,500 in credit available to you that you’re not using. Mortgage companies like that. But if you owe $9,500 on that same credit card account, you have a poor credit-utilization ratio and it will lower your credit score and your chances for a mortgage.

Worried that you have too much credit card debt to qualify for a mortgage? MMI has nonprofit debt relief solutions to save you money and get you out of debt quickly: 7x faster than handling things on your own. Best of all, financial counseling from MMI is free and available 24/7, online and over the phone. Connect today and see how quickly we can help you get out of debt.

Tagged in Mortgages and foreclosure, Debt strategies

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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