How to Lower Your DTI Before Refinancing (6 Strategies)

Your debt-to-income ratio (DTI) is one of the biggest factors lenders evaluate when you apply for a refinance. Even if your credit is excellent and you’ve built solid equity, a high DTI can hold you back — or force you into higher rates and tougher terms.

The good news? Lowering your DTI is often easier (and faster) than most homeowners realize. A few targeted moves may shift your ratio enough to help you qualify, unlock better pricing, or make underwriting much smoother.

Here are six practical strategies to lower your DTI before refinancing.

Key Takeaways

✅ Lowering your DTI may improve your refinance approval odds and interest rate

✅ Paying down revolving debt, not installment loans, often has the fastest impact

✅ Increasing income (even slightly) can lower your DTI quickly

✅ Avoid taking on new debt before applying — it can raise your DTI overnight

💡 Pro Tip: Many homeowners don’t realize that a slightly lower rate or reduced fees can lower their payments and, in turn, reduce their DTI. At Fincast, we make it easy to see if more competitive offers are available. Upload your Loan Estimate to Fincast to see competing offers side-by-side, without extra credit pulls.

What Lenders Look For When Evaluating Your DTI

Your DTI compares your total monthly minimum debt payments to your gross monthly income. Lenders use DTI to measure how comfortably you can take on a new mortgage payment.

Most refinance programs allow:

• Conventional loans: up to 36–45% (sometimes 50%)

• FHA loans: 31-43%, but some lenders may allow a higher DTI with automated underwriting

• VA loans: no strict cap, based on residual income, and guidelines varies by lender

• USDA loans: around 41%, with limited flexibility

💡 Pro Tip: A lower DTI doesn’t just improve approval odds — it can also lead to better pricing, which means lower monthly payments and long-term savings.

6 Strategies to Lower Your DTI Before Refinancing

These moves can quickly lower your DTI. You don’t need to do them all — even one or two may shift your ratio enough to help you qualify.

1️⃣ Pay Down Revolving Debt (Credit Cards)

Revolving debts are the most powerful lever for lowering DTI.

Lenders use your minimum payment, not your balance. That means:

Paying down $1,500 on a credit card could lower your minimum payment by $35–$75, and that can drop your DTI by 1–2 percentage points.

Why this works:

Credit card minimums change every month, and reducing them immediately lowers your debt load in the lender’s calculation.

Best approach:

• Target the card with the highest minimum payment

• or-

• Pay down the card that’s closest to its limit

💡 Pro Tip: Paying credit cards below 30% utilization may also boost your credit score, improving your refinance rate.

2️⃣ Avoid Taking On New Debt (Especially Auto Loans)

A single new loan can push your DTI up by several points — instantly.

Avoid before refinancing:

❌ Auto loans

❌ Furniture financing

❌ New credit cards

❌ “0% interest” promo loans

❌ Buy-now-pay-later payments

These all create new minimum payments, which lenders must count.

What to do instead:

• Delay major purchases

• Avoid opening new accounts

• Pause unnecessary financing

Even one new $300 car payment could push a DTI above the standard limit.

💡 Pro Tip: Curious how your current offer compares? Fincast shows you whether another lender may be offering more competitive terms without restarting the process.

3️⃣ Increase Your Income (Even Slightly)

DTI calculations use gross monthly income, so even a small raise or additional income stream helps.

Ways to increase income that lenders accept:

• Raise or promotion

• Verified overtime (2-year history preferred)

• Consistent commissions (averaged over 24 months)

• Side-business income (12–24 months history)

• Rental income with a lease agreement

Add-on option:

Add a co-borrower — their income significantly lowers your DTI as long as they have minimal debt.

💡 Pro Tip: If your employer offers overtime or bonus shifts and you regularly work them, it may reduce your DTI. Keep in mind that many lenders don’t count this income until you’ve worked it for 24 consecutive months.

4️⃣ Refinance Into a Lower Monthly Payment

Yes — the refinance itself can help lower your DTI.

If your new mortgage payment is lower than your current one, your DTI improves automatically.

This happens when you:

• Lower your interest rate

• Extend the loan term

• Switch to a more favorable loan program

• Remove PMI

• Consolidate higher-interest debt

Why lenders like this:

It reduces your monthly financial strain, lowering their risk.

💡 Pro Tip: Even if your DTI is borderline, a payment-reducing refinance is more likely to be approved.

5️⃣ Consolidate High-Interest or High-Payment Debts Carefully

Debt consolidation can:

• Lower your monthly minimum payments

• Reduce your overall DTI

• Simplify your financial profile

Options include:

• Personal loan consolidation

• Balance transfer (with lower minimum payment)

• Cash-out refinance (if your DTI already qualifies)

• Paying off multiple credit cards at once

Important warning:

Only consolidate if your new minimum payments are lower. Some consolidation loans have high payments, which can increase your DTI rather than lower it.

6️⃣ Correct Errors on Your Credit Report

If your DTI looks higher than expected, your credit report might be the problem.

Look for:

• Duplicate accounts

• Incorrect balances

• Closed accounts showing payments

• Old delinquencies misreported

• Student loans are showing incorrect payments

Fixing these can reduce your reported monthly obligations — and lower your DTI without paying off a dollar of debt.

💡 Pro Tip: Mortgage lenders rely heavily on accurate data. Even one error can inflate your DTI and jeopardize approval.

How Fast Can You Lower Your DTI?

There’s no magic button for lowering your DTI, but some strategies move the needle much faster than others.

Fastest methods:

• Paying down credit cards

• Removing errors on your credit report

• Avoiding new debt

• Adding a co-borrower

Slower methods:

• Increasing income

• Paying down installment loans

If you're planning to refinance soon, start with the high-impact, fast-moving items first.

How Fincast Helps You Even If Your DTI Is Borderline

Every lender views DTI differently. One may deny a 45% DTI, but another may approve it easily. Either way, pricing differences can be thousands of dollars.

That’s where Fincast gives you the edge.

With Fincast, you can:

1. Upload your Loan Estimate securely

2. Let vetted lenders compete privately to beat your offer

3. Compare side-by-side quotes — no extra credit pulls

4. Choose the one that gives you the best terms

A small improvement in your DTI — even 1–2% — can unlock entirely new refinance options and better pricing. Fincast helps you see which lenders can give you the strongest offers.

FAQs

1. What DTI do I need to refinance?

Many lenders prefer 43–45% or lower, but FHA and VA programs allow higher limits; this varies by lender.

2. Does paying off credit cards lower my DTI immediately?

Yes. Lenders use your new minimum payment amounts as soon as your statement updates.

3. Can I refinance with a high DTI?

It depends on the lender and the chosen loan program. Your best bet is to try to lower your DTI before refinancing.

4. Do lenders count all expenses in DTI?

No. Only minimum debt payments count — not utilities, groceries, or subscriptions.

5. How much can lowering my DTI improve my rate?

It depends on your overall profile, but lower DTI often means better pricing on conventional loans.

Bottom Line

Lowering your DTI before refinancing is one of the most powerful ways to improve your approval odds and secure better loan terms. You’re in a strong position when you’ve reduced revolving debt, avoided new obligations, strengthened your income profile, and corrected any inaccuracies on your credit report.

A refinance can help reduce your payment, improve your loan terms, and increase your long-term financial flexibility. Upload your Loan Estimate to Fincast to see whether vetted lenders may offer better terms and help you move forward confidently.