Debt-to-Income Ratio (DTI)
DTI is the percent of your gross monthly income that goes toward debt payments. Lenders use it to decide how much mortgage you can safely handle.
How to Calculate DTI
Front-End Ratio (Housing Only)
Back-End Ratio (All Debts)
Proposed mortgage payment ÷ Gross monthly incomeBack-End Ratio (All Debts)
All monthly debt payments ÷ Gross monthly income
What Counts as Debt?
- Credit-card minimums
- Auto, student, and personal loans
- Child support or alimony
- Other mortgages
- Your new mortgage payment (PITIA)
Lender Limits
| Loan Type | Front-End Max | Back-End Max |
|---|---|---|
| Conventional | 28% | 36% (up to 45% with PMI) |
| FHA | 31% | 43% (up to 57% with compensating factors) |
| VA | n/a | 41% (higher with residual income) |
| USDA | 29% | 41% |
Real Example
Gross monthly income: $6,000
Current debts: $400 car + $250 student loan + $50 credit card = $700
Proposed mortgage: $1,400
Front-End DTI: $1,400 ÷ $6,000 = 23% ✅
Back-End DTI: ($700 + $1,400) ÷ $6,000 = 35% ✅
7 Fast Ways to Lower DTI
- Pay off small balances: A $300 car loan can drop your ratio by 5%.
- Refinance auto loan to a longer term for lower payment.
- Ask for a raise—lenders use gross income, not net.
- Add a co-borrower with low debts and stable income.
- Switch to an FHA loan if your credit is under 700; it allows higher DTI.
- Pay down credit cards before the statement date so new balances report.
- Increase 401(k) contributions to reduce taxable income—some lenders use gross, others use net.
Tip: If you’re close to the limit, ask your loan officer about Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Product Advisor—automated systems may approve up to 50% back-end DTI with strong credit or reserves.
What NOT to Do
- Don’t open new credit cards or auto loans during underwriting.
- Don’t cosign for anyone—it counts against you.
- Don’t switch from salary to commission-heavy income right before applying. Check Your DTI Instantly