Two separate questions, so take them in turn: a nearly paid-off installment loan can sometimes drop out of your DTI, and a payoff requirement is usually reasonable. On the fewer-payments rule, the programs differ: - Conventional (Fannie/Freddie). An installment loan, like a car loan, with 10 or fewer monthly payments remaining may be excluded from your debt-to-income ratio. It isn't automatic. Expect documentation of the remaining term, and an underwriter can still count a payment that would strain you over those final months, especially on a thin file with little cash left after closing. - FHA. Stricter on two counts. The debt needs fewer than 10 months remaining, AND the combined payments of every debt you're excluding must be 5% or less of your gross monthly income. FHA also doesn't allow paying a balance down just to get under the 10-month line. So the pay-it-down play is a conventional strategy; on FHA the loan generally needs to be paid off, not merely down. Either way, paying off a car loan rarely moves your credit score much. Do it for the ratio, not the score. On being asked to retire debt to qualify: every program has a ceiling. Conventional caps at 50% DTI with an automated approval. FHA automated approvals run up to 46.99% housing and 56.99% total; that's where the automated system draws the line in practice, and it takes an AUS approval plus a strong overall file, so it isn't available to every borrower. If your existing payments push past the cap, retiring debt frees that room for a housing payment. A good loan officer shows you the math on which specific debts move the needle. We're glad to walk through it on a free Roadmap conversation.