# Debt-to-income ratio

> Debt-to-income ratio is your total monthly debt payments, including the new housing payment, divided by your gross monthly income. Lenders use it to judge whether you can afford a mortgage, and each loan program sets its own limits.

Also called: DTI, back-end ratio. Topic: Mortgages and loans.

Lenders use DTI to judge whether you can carry a new mortgage payment on top of what you already owe. It’s one of the main numbers behind a [pre-approval](https://brokerandagent.com/glossary/pre-approval).

## How do you calculate DTI?

Add up your monthly debt payments, including the new housing payment, and divide by your gross monthly income: what you earn before taxes and deductions. Multiply by 100 to get a percentage.

The CFPB’s example: a $1,500 mortgage payment, a $100 auto loan and $400 in other debts add up to $2,000/month. On $6,000 of gross monthly income, that’s a DTI of about 33%.

## What counts as debt?

Lenders count the monthly payments on your credit report and other obligations you must pay: car loans, student loans, minimum credit card payments, personal loans, child support and alimony. The new housing payment counts in full, including principal, interest, property taxes, homeowners insurance, mortgage insurance and [HOA dues](https://brokerandagent.com/glossary#hoa-dues), often summed up as [PITI](https://brokerandagent.com/glossary#piti).

Everyday costs such as groceries, utilities, phone bills and car insurance usually aren’t counted, though you still have to pay them.

## What’s the difference between front-end and back-end DTI?

The front-end, or housing, ratio is just the housing payment divided by income. The back-end ratio includes every debt, and it’s usually what people mean by DTI. Some programs set limits on both, written as a pair such as 31/43: 31% for housing and 43% in total.

## What DTI do lenders allow?

It depends on the program and the lender; the CFPB notes that different loan products and lenders have different limits. Fannie Mae, which sets the rules for many [conventional loans](https://brokerandagent.com/glossary#conventional-loan), allows up to 36% on loans underwritten by hand, up to 45% with credit score and reserve requirements met, and up to 50% on loans approved through its automated system.

An [FHA loan](https://brokerandagent.com/glossary/fha-loan) underwritten by hand starts at 31/43, with up to 40/50 allowed for borrowers with compensating factors such as cash reserves. A [VA loan](https://brokerandagent.com/glossary/va-loan) uses 41% as its standard and looks at residual income alongside it. Meeting a program’s maximum isn’t the same as being comfortable: a lower ratio leaves room for savings and surprises.

## How can you lower your DTI?

Pay off a debt with a large monthly payment, avoid new debt while you shop, add a co-borrower’s income, or shrink the housing payment with a lower price, a larger [down payment](https://brokerandagent.com/glossary#down-payment) or a lower [interest rate](https://brokerandagent.com/glossary#interest-rate). [discount points](https://brokerandagent.com/glossary#discount-points) can buy a lower rate for cash at closing. Ask your lender how they’d treat a specific debt before you pay it off.

## DTI on $7,500 of gross monthly income

| | |
| --- | --- |
| Gross monthly income | $7,500 |
| New housing payment (PITI plus HOA) | $2,400 |
| Car loan | $450 |
| Student loan | $250 |
| Credit card minimums | $100 |
| Total monthly debts | $3,200 |
| Front-end ratio ($2,400 ÷ $7,500) | 32% |
| Back-end ratio, or DTI ($3,200 ÷ $7,500) | 42.7% |

Paying off the $450 car loan would bring this borrower’s DTI down to about 36.7%. Whether 42.7% qualifies depends on the program and how the loan is underwritten.

## Common mistakes

- Using take-home pay instead of gross income.
- Leaving property taxes, insurance, mortgage insurance or HOA dues out of the housing payment.
- Financing a car or furniture between pre-approval and closing.
- Treating the maximum DTI a program allows as a comfortable budget.

## Questions

### Is 43% the maximum DTI for a mortgage?

Not as a universal rule. Limits vary by program and lender: Fannie Mae allows up to 50% on loans approved through its automated system, while FHA’s manual guidelines start at 43% total.

### Does my current rent count in DTI?

Usually not when you’re buying a home to live in, because the new housing payment replaces it. If you’ll keep paying rent or another mortgage, ask your lender how it’s counted.

### Does DTI affect your credit score?

No. Your income isn’t on your credit report, so DTI isn’t part of your score, though the debts behind it and how you pay them are.

Calculator: [Mortgage calculator](https://brokerandagent.com/tools/mortgage-calculator)

## Related terms

- [Pre-approval](https://brokerandagent.com/glossary/pre-approval): Pre-approval is a lender’s written statement of how much it is willing to lend you, based on income, assets and credit it has checked. It strengthens an offer, but it isn’t a guaranteed loan.
- [Credit score](https://brokerandagent.com/glossary#credit-score): A credit score is a three-digit number, usually from 300 to 850, that predicts how likely you are to repay debt based on your credit history. Mortgage lenders use it to decide whether to approve you and at what rate.
- [PITI](https://brokerandagent.com/glossary#piti): PITI stands for principal, interest, taxes and insurance, the four main parts of a monthly mortgage payment. Lenders add mortgage insurance and HOA dues where they apply to figure what you can afford.
- [Underwriting](https://brokerandagent.com/glossary#underwriting): Underwriting is the lender’s review of a mortgage application to decide whether to approve it. An underwriter verifies income, assets, debts and credit and checks the appraisal and title before giving final approval.
- [Loan-to-value ratio](https://brokerandagent.com/glossary#loan-to-value-ratio): Loan-to-value ratio is the mortgage amount divided by the home’s value, usually the lower of the price or the appraised value. A $360,000 loan on a $400,000 home is 90% LTV; a lower LTV generally means better terms.

## Sources

- [CFPB: What is a debt-to-income ratio?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/)
- [Fannie Mae Selling Guide B3-6-02: Debt-to-income ratios](https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios)
- [HUD: FHA Single Family Housing Policy Handbook 4000.1](https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh.pdf)
- [38 CFR 36.4340: VA underwriting standards](https://www.law.cornell.edu/cfr/text/38/36.4340)

Checked 2026-10-02 by the Broker & Agent team. General information, not legal, tax or lending advice.

Source: https://brokerandagent.com/glossary/debt-to-income-ratio