Debt Ratios Decoded: Help Your Clients Qualify for Higher Purchase Prices

January 19, 2026 · Scott Dillingham

Spotify

Debt ratios are the hidden gatekeeper on nearly every mortgage application — and most realtors don't know how to work around them. In this episode, Scott Dillingham shows you how GDS and TDS ratios work, when to bring in B lenders or private lenders, and how to get clients approved at higher purchase prices.

  • Debt Ratio Variations: The same 44% debt-to-income ratio means different things at different lenders due to varying calculation methods for credit cards, student loans, and income sources
  • Credit Card Calculations: Some banks use 3% of your total credit limit as a payment, even if balances are zero, significantly impacting qualification
  • Income Treatment Differs: Child tax benefits, maternity leave, rental income, and self-employed income are evaluated differently by each lender
  • B Lender Advantages: Alternative lenders accept 50-60% debt ratios, use actual payments instead of calculated minimums, and allow guarantor income
  • Private Lender Options: When traditional financing fails, private lenders focus on the overall story and exit strategy rather than strict ratios
  • Never Accept First No: If a bank declines based on debt ratios, consult a mortgage broker who can explore all available lending options


Links to Show References

LendCity Mortgages: https://lendcity.ca

  • (00:00) - Introduction to Close More Deals Podcast
  • (00:04) - Why Understanding Debt Ratios Helps Close More Deals
  • (00:44) - The 44% Debt-to-Income Ratio Explained
  • (01:00) - How Banks Calculate Total Debt Payments
  • (01:43) - Hidden Credit Card Calculation Methods
  • (02:04) - Student Debt and First-Time Homebuyer Considerations
  • (02:38) - Income Source Variations Across Lenders
  • (02:44) - Self-Employed Income Treatment Differences
  • (03:14) - Why Clients Shouldn't Apply Randomly to Lenders
  • (03:40) - Introduction to B Lenders and Alternative Financing
  • (04:00) - How B Lenders Use Rental and Guarantor Income
  • (04:19) - B Lender Payment Calculation Advantages
  • (04:48) - Self-Employed Approval Differences with B Lenders
  • (05:10) - Private Lender Options for Unique Situations
  • (05:37) - When Private Lending Makes Sense
  • (05:56) - Closing Remarks and Call to Action