You did the work on your credit. You have a 700, 750, 800 score and you expect a mortgage approval to be a slam dunk. Then you apply and get denied. What happened?

The short answer

The number one reason people with excellent credit get turned down for a mortgage is debt-to-income ratio, or DTI. Lenders do not make decisions based on your credit score alone. They look at the whole file: income stability, monthly debt obligations, government liens or judgments, and whether you have enough residual income left over after your mortgage and bills.

The two ways to fix a DTI problem

1. Reduce your monthly debt payments.
2. Increase your documented income.

There are no magical third options. If your backend DTI is too high, the underwriter will say no unless you change one of those two variables.

Common pitfalls that jack up DTI—even with a great credit score

• Cosigned loans and vehicles. If you are the primary borrower on a car loan, that monthly payment is 100 percent counted in your debt. If you are a cosigner, the payment can only be excluded when the primary borrower is clearly making the payments and the payment history proves it. If the primary is late or in repo, that is your debt too.
• Hidden government debts. You might think everything shows up on your credit report, but government debts do not always appear there. Lenders run systems like SAM (System for Award Management) and other government searches to detect owed taxes, unpaid SBA loans, or state tax liens. Those show up during underwriting and affect your qualification.
• Judgments and payment arrangements. A judgment from a past court case must be resolved or documented. If you have a payment arrangement, that monthly payment is added to your DTI even if the judgment does not appear as a tradeline.
• 401k or retirement loan payments. If your paycheck shows a deduction to repay a retirement loan, that payment counts against your DTI.
• Minimum credit card payments and student loans. Lenders count the monthly obligations they can verify. Minimum payments, student loan payments, and similar recurring liabilities all decrease your usable income for qualification.

A blunt truth

“Just because you have a good credit score does not mean that you are credit worthy.”

That sounds harsh, but it gets to the point. Your credit score measures past payment behavior and risk. It does not, by itself, guarantee you have the current income or low enough debts to carry a mortgage.

Income documentation and the two-year rule

Most traditional mortgage underwriting (Fannie Mae, Freddie Mac, FHA, VA, USDA) still relies on a two-year history to document income. This matters for anyone with non-W2 or gig income:

• If you drive for a delivery service, do DoorDash, Uber, or run a side business, lenders typically want two years of tax returns showing that income before they will count it.
• There are bank statement programs that use 12 or 24 months of bank deposits to qualify nontraditional income. Those can help, but they have limitations. Many bank-statement programs top out at 85 percent loan-to-value, meaning you must put at least 15 percent down. That makes them incompatible with 100 percent or low-down-payment programs like VA, USDA, or FHA 96.5 percent.
• Even if a program uses 12 months of statements, you must prove consistent deposits and document business or gig income properly. Underwriting is still catching up to modern work arrangements.

Specific loan program notes

• VA and USDA can offer 100 percent financing, but those programs require traditional income documentation and underwriting rules—bank-statement programs usually cannot be used for 100 percent financing.
• FHA offers up to 96.5 percent LTV, but again you need the right income documentation for the lender to count non-W2 earnings.

Checklist: What to review before you apply

1. Run your own credit reports from all three bureaus and look for unexpected tradelines, collections, or errors.
2. Check for judgments, tax liens, and government debts. Resolve or document them before applying.
3. Avoid co-signing if you plan to apply for a mortgage. If you already did, make sure the primary borrower has a spotless, verifiable payment history and can show direct debits or checks proving on-time payments.
4. If you have gig or self-employed income, review how it is documented. If you need it counted, plan at least two years of tax returns or consider a bank-statement program and be ready for a higher down payment requirement.
5. Reduce revolving and installment debt where possible to lower your DTI.
6. Increase documented income where possible—overtime with W2s, legitimate business income reported on tax returns, or bring in more qualified income sources.
7. Account for paycheck deductions like 401k loan repayments; they count.
8. Give yourself time. If a lender needs two years of tax returns showing new income, you should have started that plan two years earlier.

Quick examples to illustrate

• Someone with a 730 credit score but a 60 percent backend DTI will be denied regardless of the score until that DTI drops or income rises.
• You cosigned for a friend who has been late on payments. Even if your credit score was great yesterday, missed payments will hit your file and your mortgage eligibility.
• You began driving for a delivery app eight months ago. That income will likely not be counted unless you have two years of tax returns or qualify under a bank-statement program that accepts that documentation and a larger down payment.

Final thoughts

Good credit is important, but it is just one piece of the mortgage puzzle. Lenders care about documented, sustainable income and how much of your monthly cash flow is already spoken for. Reduce debt, document and stabilize income, resolve judgments and government debts, and avoid taking on other people s obligations if you want the best chance of a “yes.”

Do your homework early. The two-year requirement and the many items that do not always show on a credit report mean preparation matters. Plan ahead, get your ducks in a row, and you will dramatically improve your odds of getting approved.