Under which condition might a lender deny a mortgage application?

A lender might deny a mortgage application if the applicant's debt-to-income (DTI) ratio is too high. The DTI ratio is a critical metric in mortgage lending, as it measures the proportion of an applicant's income that goes toward servicing debt. Lenders generally prefer a lower DTI because it indicates that the borrower has enough income to handle monthly mortgage payments alongside other financial obligations.

When the DTI is excessively high, it raises concerns about the applicant's financial stability and ability to repay the loan. Lenders typically have specific thresholds for DTI ratios that can vary based on the type of mortgage and the lender's guidelines. If an applicant exceeds these thresholds, it signals a greater risk to the lender, which can lead to a denial of the mortgage application.