Mortgage Loan Affordability: What You Need to Know in 2026
So you want to buy a house. Awesome. But before you start picking out paint colors, there is one big question lenders are going to ask: can you actually afford this loan? It all comes down to one number called your Debt-to-Income ratio, or DTI. If you earn $5,000 a month and your monthly bills total $2,000, your DTI is 40%. Most loan programs want your DTI to stay somewhere between 43% and 50%, depending on the loan type. Let's break down everything that goes into that number, and more.
What Debts Count Against You?
When a lender calculates your DTI, they look at every monthly debt payment that shows up on your credit report or that you tell them about. Here is the full list of what gets included:
- Auto loans and leases
- Student loans
- Credit card minimum payments
- Personal loans
- Child support or alimony you pay
- Co-signed debt (yes, even loans you co-signed for someone else)
- Buy Now Pay Later plans like Affirm, Klarna, and Afterpay
- Motorcycle loans
- Boat loans
- RV loans
- IRS installment agreements (payment plans with the IRS)
- State tax payment plans
- Other recurring debts
Say you have a $400 car payment, $150 minimum on credit cards, and a $200 student loan payment. That is $750 a month in existing debt before the mortgage is even added. If your new mortgage payment would be $1,500, your total monthly debt is $2,250. If you earn $5,000 a month, your DTI is 45%. That is within range for many loan programs but getting close to the limit.
How Many People Can Be on a Loan?
Here is something a lot of people do not know: you can have more than one person on a mortgage. In most cases, lenders allow up to four borrowers on a single loan. This is helpful when:
- A couple is buying together
- A parent wants to help an adult child qualify
- Two friends or family members are purchasing a home together
Jordan earns $3,000 a month but wants to buy a home that requires $4,500 a month in qualifying income. If Jordan adds a parent who earns $2,500 a month, their combined income is $5,500 a month, which may be enough to qualify.
Every person added to the loan brings their debts with them. So adding someone with a lot of debt might hurt more than help. Run the numbers both ways before you decide.
Part-Time Income: Does It Count?
Yes, part-time income can count, but there are rules. Most lenders want to see a two-year history of that part-time job. They will average the income over 24 months.
Alex works part-time at a coffee shop and has done so for three years. Last year Alex earned $12,000 from that job, and the year before earned $10,000. The lender averages that: ($12,000 + $10,000) divided by 24 months = $916 per month in qualifying income.
If the part-time job started less than two years ago, many lenders will not count it at all.
1099 Income (Self-Employed or Freelance)
If you receive a 1099 instead of a W-2, you are considered self-employed in the eyes of the lender. This is not a dealbreaker, but it does mean more paperwork. Lenders typically require:
- Two years of tax returns (personal and business if applicable)
- A year-to-date profit and loss statement
- Two years of 1099 forms
Lenders use your net income after write-offs, not your gross. If you earned $80,000 but wrote off $30,000 in business expenses, the lender may only count $50,000 as your qualifying income.
Taylor is a freelance graphic designer. Taylor made $70,000 last year and $60,000 the year before. After deductions, the taxable income was $45,000 and $40,000. The lender averages those: ($45,000 + $40,000) divided by 24 = $3,541 per month. That is the number used to qualify.
Tip Income
If you work in a restaurant, hotel, or anywhere tips are part of your pay, lenders can count that income. But again, a two-year history is required.
Lenders will look at your W-2 or tax returns to see how much tip income was reported. Unreported tips do not count.
Sam is a server who makes $15,000 in base wages but reported $18,000 in tips on their taxes last year, and $16,000 the year before. The lender averages the total income including tips over 24 months to determine the monthly qualifying amount.
Commission Income
Commission-based earners, think salespeople, real estate agents, and loan officers, also need a two-year history. Lenders will average the commission income over 24 months.
If your commission income has been going up, that is great. If it has been going down, the lender may use the lower of the two years or the most recent year, whichever is more conservative depending on the loan program.
Morgan earned $40,000 in commissions two years ago and $55,000 last year. The lender averages: ($40,000 + $55,000) divided by 24 = $3,958 per month in qualifying commission income.
Overtime Pay
Overtime can be counted as qualifying income, but the same two-year rule applies. Lenders want to see that overtime is consistent and not a one-time thing.
Riley works in manufacturing and has earned $8,000 in overtime each of the last two years. That averages to $666 per month that can be added to Riley's qualifying income.
If overtime only started six months ago, most lenders will not count it yet.
Co-Signing: What You May Not Realize
If you co-signed a loan for someone else, whether it is a car, a student loan, or anything else, that monthly payment may show up on your credit report and count against your DTI.
Some loan programs allow you to exclude that co-signed debt if you can prove that the primary borrower has been making the payments on their own for the last 12 months. You would need bank statements or payment history to show this.
Casey co-signed on a sibling's car loan three years ago. The payment is $350 a month. If the sibling has paid on time for 12 straight months and Casey can document it, some lenders may remove that $350 from Casey's DTI calculation.
Collections: What Happens to Those?
Not all collections are treated the same in 2026. Here is a general breakdown:
Under updated guidelines from major loan programs, medical collections are often excluded from DTI calculations and may not need to be paid off before closing. This is a significant change that has helped many buyers who had unexpected hospital bills.
These may or may not need to be paid depending on the loan type, the lender, and the total dollar amount. Some conventional programs ignore collections under a certain threshold (often around $2,000 total). Others require them to be paid or set up in a payment plan.
Dana has a $500 medical collection and a $1,200 cable company collection. For an FHA loan, the medical collection may be ignored entirely. The cable company collection may require a payment plan or payoff depending on the lender's guidelines.
Student Loan Debt in 2026
Student loans are one of the most misunderstood parts of mortgage qualifying. Here is what matters:
- If your student loans are in repayment, the actual payment shows up in your DTI.
- If they are in deferment or on an income-driven repayment plan, lenders may still count a calculated payment even if your current payment is $0.
- For conventional loans, lenders typically use the actual payment on your credit report or 1% of the outstanding balance if no payment is listed.
- For FHA loans, lenders may use 1% of the balance or the payment listed on your credit report.
Jesse has $40,000 in student loans but is on an income-driven plan with a $0 payment. The lender may still calculate 1% of $40,000, which is $400 per month, and include that in the DTI. That can make a big difference in qualification.
Medical Debt: The 2026 Update
One of the biggest shifts in recent years is how medical debt is treated. As of 2026, the major credit bureaus have removed most medical debt under $500 from credit reports. Many larger medical debts have also been removed from reports by the bureaus.
Additionally, many loan programs no longer require medical collections to be paid off before closing. This has opened the door for many buyers who previously could not qualify.
The Bottom Line
Getting a mortgage is like putting together a puzzle. Your income, your debts, your credit, your employment history, and the type of loan you choose all fit together in specific ways. Understanding what counts and what does not can make the difference between getting approved or not.
Whether you earn a salary, work part-time, earn tips, get commissions, or file a 1099, there are options available. Whether you have student loans, medical debt, old collections, or co-signed loans, there are programs that may still work for you.
The best first step is always to speak with a licensed mortgage professional who can review your full financial picture and walk you through which loan options fit your specific situation.
The Affordability tab lets you plug in income for up to four borrowers, list every recurring debt (including BNPL, IRS plans, and co-signed loans), and see the largest home price each loan program will support. You see the qualifying math the lender sees before you ever talk to one.