Buying a rental property isn’t only about how much money you earn, but also how much debt you have. If you plan to get a loan to finance your investments, maintaining a healthy debt-to-income ratio is essential. For investors, particularly those with several properties in their portfolio, carrying a lot of debt can be an issue, which is why offsetting it with high income is paramount.
The Federal Reserve has just released its national debt-to-income map, which shows where the best-qualified buyers actually live. For fix-and-flippers and landlords looking to buy and hold, it provides an invaluable snapshot of what lenders look for in borrowers and the regional shifts at play.
The map shows that most qualified buyers are not necessarily where you think they are.
What Is DTI?
A debt-to-income ratio, as the name suggests, measures a person’s debt when measured against their income. The highest DTI averages—over 2.0—mean residents carry $2 in debt for every $1 of income.
When it comes to DTIs, less is more. The more income, the less debt wins. For example, if half your monthly income went toward paying off your recurring monthly debt, your DTI would be 50%, which is not good. A DTI of 35% or less is considered favorable by lenders.
Shifting Debt-to-Income Ratios: The 2025 Landscape
Historically, the wealthier states on both coasts have been renowned for both high housing prices and equally high buyer and rental demand. That’s because many of these areas are considered “barrier” markets, i.e., there is a barrier to land availability, forcing prices up.
According to the Federal Reserve’s map, however, the most favorable borrowing environments are not found where the uber-wealthy live in New York and California, but rather in the Midwest—Pennsylvania, Wisconsin, and Ohio— here, DTI rates are lower, meaning that qualified buyers here are more likely to receive loans.
For flippers, it means these markets offer a greater likelihood of finding qualified buyers. For landlords, the lending environment here is more favorable for buying investments, assuming the prospective buyer falls into a favorable DTI category.
Mortgage Balances and Buyer Limitations: Local Trends
This might not come as a surprise, but debt in America is on the rise. The combination of low inventory and higher interest rates creates a toxic borrowing environment, pushing up house prices and mortgage balances, particularly in some coveted urban areas.
The Quarterly Report on Household Debt and Credit for the second quarter of 2025, based on the New York Fed Consumer Credit Panel, showed that total household debt increased by $185 billion from the first quarter to $18.39 trillion. There are now 67 cities in the U.S. where the mortgage balance averaged $1 million or more as of June 2025, according to the credit reporting bureau Experian. Here are the top 10, with the average balance:
- Golden Oak, FL: $3,627,594
- Gulf Stream, FL: $3,206,007
- Golden Beach, FL: $2,969,951
- Captiva, FL: $2,620,156
- Atlantis, FL: $2,585,199
- Montecito, CA: $2,487,787
- Hidden Hills, CA: $2,149,578
- Atherton, CA: $2,137,851
- Hunts Point, WA: $2,016,164
- Sagaponack, NY: $1,977,857
As the list shows, Florida, not California or New York, is the state with the top five cities with the highest mortgage balances. This means that here, investors must be prepared for tighter margins and increased competition, even as local incomes rise. Conversely, cities across the Midwest and the Rust Belt, such as Cincinnati and Cleveland, still remain attractive propositions for investors due to lower mortgage burdens and sustainable DTI profiles.
Lower House Prices Can Offset Rate Fluctuations and DTI Ratios
“When people are staring at a 6% or 7% [mortgage] rate, they just start to get reluctant,” Rick Arvielo, chief executive and co-founder of mortgage lender New American Funding, told the Wall Street Journal in August. “Affordability is still a major issue.”
Since then, the Fed has cut interest rates twice, most recently in October, but rates remain volatile, hinging on every word from Fed chair Jerome Powell. His recent comments about halting rate cuts at the Fed’s December meeting sent rates back up after his recent cut.
Favorable neighborhoods for mom-and-pop investors—flippers and landlords—boil down to lower prices and neighborhoods with buyers with favorable DTI, making it the best environment for investing and lending.
Soaring National Debt Could Pose Big Problems
A homebuyer’s revolving monthly debt is tied to their interest rate, which in turn is tied to the national financial landscape. In May, the New York Times reported some analysis that predicted President Trump’s “Big, Beautiful Bill” could inflate America’s debt to more than 130% of the size of its entire economy.
“A crisis always feels far off until you’re in one,” Natasha Sarin, president and cofounder of the Yale Budget Lab, said. “We don’t know exactly where that cliff is, where you can’t breach debt levels” of a certain size. “But we know that we’re inching closer to whatever that point is.”
These sentiments were echoed recently by Tesla CEO Elon Musk, who told podcaster Joe Rogan, “It would be accurate to say that even unless you could go like super Draconian…on cutting waste and fraud, which you can’t really do in a democratic country, then…there’s no way to solve the debt crisis.”
Musk added that artificial intelligence (AI) and robotics could be a way out of debt. “We need to grow the economy at a rate that allows us to pay off our debt.”
Interest Rate Cuts Might Not Move the Needle
For real estate investors hoping that Fed rate cuts will have the desired effect if the national debt remains dangerously high, that could be wishful thinking. Musk’s comments from his appearance on Joe Rogan’s podcast earlier this year appear to hold in unpredictable economies: Tangible assets such as real estate become more valuable because people will always need a place to live, regardless of the economic environment.
“It is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high,” Musk advised.
Final Thoughts: Affordability and Long-Term Stability Are Keys to Sound Investing
The debt-to-income map is a blueprint that investors can follow to locate some of the most stable housing markets in the country, where traditionally conservative investing principles of low debt and paying bills on time prevail. They are not the most glamorous markets, but they also don’t have a large percentage of highly leveraged residents. In turbulent economic times, low debt-to-income states such as Ohio, Pennsylvania, and North Dakota are some of the most resilient markets in the U.S.
Realtor.com and the Wall Street Journal named Manchester-Nashua, NH, as its top market for the second straight quarter in its Fall 2025 Housing Market Ranking due to its “sustained demand, brisk sales activity, and notable year-over-year price growth,” coupled with its balance of “desirability with relative value.” New Hampshire has a relatively low DTI ranking of 1.4.