Debt-to-Income Ratios
Loan Process
Debt-to-Income Ratios
Your debt-to-income (DTI) ratio is one of the most important factors lenders use to determine how much you can borrow and whether you qualify for a mortgage.
What is DTI?
DTI is the percentage of your gross monthly income that goes toward monthly debt payments. It's calculated by dividing your total monthly debt payments by your gross monthly income. For example: $2,000 in monthly debts ÷ $6,000 gross monthly income = 33% DTI.
Front-End vs. Back-End DTI
Front-end DTI (housing ratio): Only your proposed housing payment (PITI) divided by gross income. Most programs want this below 28–31%. Back-end DTI (total debt ratio): All monthly debts including housing, car payments, student loans, credit cards, and other obligations divided by gross income. Most programs want this below 43–50%.
DTI Limits by Loan Type
Conventional: up to 45–50% with strong compensating factors. FHA: up to 57% with compensating factors. VA: no hard limit, but 41% is the guideline. USDA: up to 41% back-end. Jumbo: typically 43% or lower. Hard Money: varies by lender, often more flexible.
How to Improve Your DTI
Pay down revolving debt (credit cards) before applying. Avoid taking on new debt. Increase your income with a raise, second job, or documented side income. Pay off installment loans if close to payoff. Consider a co-borrower with additional income. Ask us about loan programs with higher DTI allowances.
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