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A recent survey of loan officers at 57 lenders found that car payments, not student loans, are most likely to block a first-time buyer's mortgage approval.
Auto loans were cited by 47% of loan officers as the type of debt most commonly stopping an otherwise qualified buyer, compared with 27% for credit card balances and just 15% for student loans.
Keep reading for some practical advice about balancing car payments with mortgage approval.
The data: what's actually blocking first-time buyers
HomeLight's Lender Insights & Predictions for Summer 2026 gathered these findings from loan officers across the country, in a poll fielded between June 10 and June 23, 2026.
When asked which type of consumer debt most commonly stops a qualified renter from getting a first mortgage, loan officers pointed to auto loans far more often than any other category.
| Debt type | Share of loan officers who named it as the top blocker |
|---|---|
| Auto loans | 47% |
| Credit card balances | 27% |
| Student loans | 15% |
One surveyed loan officer in St. Augustine, Fla., with 24 years of experience put it plainly, saying, "There is nothing sexier than a paid-off car."
Her broader point: Buyers need a wake-up call about how much a car payment quietly limits their mortgage options.
Why car payments hit your mortgage approval harder
The reason comes down to how debt-to-income ratio (DTI) works. Lenders add up all of your required monthly debt payments, including your future mortgage payment, and divide that by your gross monthly income.
Most lenders cap DTI between 43% and 50%, depending on the loan program. This sounds complex, but ultimately, it's pretty simple: It means any dollar committed to an existing debt is a dollar that can't go toward your mortgage payment.
Car loans are particularly costly in this calculation for two reasons. First, they're almost always a fixed, full-amount monthly payment with no minimum-payment flexibility the way credit cards have. A $500 car payment counts as $500 in your DTI every month, with no way to pay less that month if your budget is tight.
Second, auto loan terms have stretched out in recent years, meaning many buyers are carrying a larger, longer-term car payment right at the moment they're trying to qualify for a mortgage.
Student loans, by comparison, often have income-driven repayment plans or lower monthly obligations relative to the total balance, which can make them lighter on DTI than their headline balance suggests.
See what you qualify for in as little as 3 minutes — no credit impact
How a car payment limits your homebuying power
A $300 monthly car payment could reduce the home price range you qualify for by $45,000 to $60,000, depending on your interest rate, loan program, other debts, down payment size, and other variables that are unique to each borrower.
Everybody's finances are different, but, for most of us, this is not a rounding error. For a buyer working with a tight budget, a mid-size auto loan can be the difference between qualifying for a starter home and getting denied altogether.
This is also why loan officers surveyed said 61% of today's first-time buyers face greater affordability strain than buyers did five years ago, while only 4% said today's buyers are better prepared financially.
Rising vehicle prices, and higher financing charges, contribute to this shift. A mortgage calculator can show you how a specific car payment changes the loan amount you'd qualify for, using your actual income and debts rather than a national average.
What to do before you apply
If you're carrying an auto loan and planning to buy in the next year, a few moves could improve your position:
Pay off the car loan first, if you can. Eliminating a car payment has an outsized effect on your DTI compared to chipping away at a larger but lower-payment debt like student loans.
Ask about seller-paid closing costs. Rather than saving more cash to bring to closing, some buyers offset costs by negotiating seller credits, which frees up savings for a bigger down payment instead. Loan officers in the same survey named this as the most common money-saving tactic among their first-time buyer clients right now.
Don't wait for 20% down. Low-down-payment loans like FHA and Fannie Mae's HomeReady program remain widely used, and 80% of loan officers surveyed said at least 10% of their first-time buyer clients get some financial help from family for their down payment.
None of this advice is customized for any specific borrower. To find out exactly how you can best qualify for the mortgage you need, talk to a loan officer or a financial adviser.
Frequently asked questions
Does a car loan affect my mortgage approval more than student loans?
This varies by borrower, but according to a 2026 survey of loan officers, the answer is yes in most cases. Auto loans were named the top blocking debt by 47% of loan officers, compared with 15% for student loans, largely because car payments are fixed and don't have the lower minimum-payment options that many student loan repayment plans offer.
Should I pay off my car before applying for a mortgage?
If you can pay it off or pay it down significantly without draining your down payment savings, it's often one of the more effective ways to improve your debt-to-income ratio. Talk to a loan officer about your specific numbers before deciding, since the right move depends on your full financial picture.
What debt-to-income ratio do I need to qualify for a mortgage?
Most lenders look for a DTI at or below 43%, though some loan programs, including FHA, allow higher ratios for otherwise qualified borrowers. Your specific limit depends on the loan program, your credit score, and your down payment.
Is a lower car payment better than paying off the loan faster?
For DTI purposes, a lower monthly payment helps you qualify for more mortgage, even if it means paying more interest over the life of the auto loan. If you're planning to buy soon, ask your lender whether refinancing your auto loan to a lower payment makes sense for your timeline.
Why is student debt talked about so much if it's not the biggest issue?
Student debt affects a huge share of buyers and carries emotional weight because of its size, but the survey suggests its actual monthly DTI impact is often smaller than a car payment's, thanks to income-driven repayment plans and extended terms.
What's the fastest way to know if my current debt is blocking me from qualifying?
A pre-approval is the most reliable way to see your real numbers, since it accounts for your specific income, debts, and credit profile rather than general guidelines. It's worth doing before you start house hunting, not after.
Bottom line
If you've been waiting to buy because you assumed your student loans would sink your application, it's worth taking another look at your full financial picture.
A 2026 survey data suggests a paid-off or low-payment car may matter more to your approval odds than the size of your student debt.
Getting pre-approved is the clearest way to find out where you stand.
See what you qualify for in as little as 3 minutes — no credit impact
Survey data referenced in this article comes from HomeLight's Lender Insights & Predictions for Summer 2026, based on responses from loan officers at 57 lending companies, fielded June 10–23, 2026. Individual results vary by lender, loan program, and borrower profile.