My wife and I recently tried to obtain a loan for the purchase of a home. Unfortunately, the establishment declined to offer us a loan on the basis of debt to income ratio, and the fact that I have a blemish that incurred almost 7 years ago. How does debt to income work exactly? I am sure the name give a lot of the meaning but, I make 48,000ish a year and as a family we only have around 4,000 in revolving debt and 18,000 in vehicle loans. What would be the best way to remedy this situation without seriously depreciation my savings account that I am holding for future expenses.

Debt to income may vary from lender to lender. But generally they look at the potential debt (your credit limits not your balances), and compare that to your earnings.