On this page
- What a debt-to-income ratio is and how to calculate it
- Which debts count toward your debt-to-income ratio
- What income counts in your debt-to-income ratio
- Debt-to-income ratio limits by loan type
- The 43% Qualified Mortgage limit no longer applies
- What a good debt-to-income ratio looks like in practice
- How to lower your DTI before you apply
- Debt-to-income ratio FAQ
- Check your debt-to-income ratio before a lender does
Your debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments, including the new mortgage. Lenders use it to judge whether you can carry the loan. Each loan program sets its own limit. For example, Fannie Mae’s automated underwriting accepts a DTI of up to 50%, while FHA’s standard limit for a manually underwritten loan is 43%.
If you plan to apply in the next few months, your DTI is one of the few numbers you can still change. This guide shows how to calculate both ratios lenders check, which debts count, the limits for each loan type, and how to lower your DTI before you apply.
What a debt-to-income ratio is and how to calculate it
Lenders look at two ratios. Both use gross monthly income, which is your pay before taxes and other deductions.
- Front-end ratio (housing ratio): your new monthly housing payment divided by gross monthly income. FHA calls this the payment-to-income ratio.
- Back-end ratio (total DTI): the housing payment plus all other monthly debt payments, divided by gross monthly income.
When a lender says “DTI,” it usually means the back-end ratio. Fannie Mae, for example, sets its limits on the total ratio only. FHA and USDA, however, set limits on both.
The formula is simple: monthly payments ÷ gross monthly income × 100.
A worked example
Say a buyer with a $120,000 salary wants a $400,000 home with 10% down on a 30-year fixed conventional loan. Here are the assumptions:
- Loan amount: $360,000
- Interest rate: 7.32%, the Freddie Mac PMMS 30-year average for the week of October 22, 2026 (your rate will differ)
- Principal and interest: $2,473
- Property taxes: $400 a month (assumed 1.2% of the price per year)
- Homeowners insurance: $150 a month (assumed)
- Private mortgage insurance: $150 a month (assumed; actual premiums vary by credit score and lender)
- HOA dues: none
- Other debts: $450 car payment, $250 student loan payment, $100 in credit card minimums
The housing payment is $3,173 a month. Gross monthly income is $10,000. So the front-end ratio is about 31.7%.
Next, add the other debts ($800) to the housing payment. Total payments are $3,973, which gives a back-end debt-to-income ratio of about 39.7%. That fits Fannie Mae’s automated limit. However, it sits above the 36% Fannie Mae allows for a manually underwritten loan without extra credit and reserve requirements.
If you want to see how lenders would price a file like this, compare a few offers before you apply.
Which debts count toward your debt-to-income ratio
Lenders take most debts from your credit report and the rest from your application and documents. These usually count:
- The new housing payment: principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA or condo dues. FHA also counts special assessments and ground rent.
- Credit cards and other revolving accounts: the minimum payment on the credit report. If no payment shows, Fannie Mae has the lender use 5% of the balance. A $3,000 balance with no listed payment, for example, counts as $150 a month.
- Installment loans: auto, personal and student loans.
- Leases: Fannie Mae counts lease payments no matter how many months remain. See whether to lease or buy a car before you apply.
- Child support and alimony: Fannie Mae counts them when they must continue for more than 10 months. For alimony, the lender may instead subtract the payment from your income.
- Co-signed debts: a loan you co-signed appears on your credit report, so it counts by default.
- Other housing payments: the mortgage on a home you will keep.
Student loans: how each program counts them
Student loans often surprise borrowers, because a $0 payment on the credit report rarely counts as $0. Here is how each program handles it, using a $40,000 balance as an example:
| Program | Rule when the credit report shows $0 | Payment on a $40,000 balance |
|---|---|---|
| Fannie Mae | Documented income-driven payment, even $0. For deferment or forbearance, 1% of the balance or a fully amortizing payment. | $0 with documents, or $400 at 1% |
| Freddie Mac | 0.5% of the balance unless a payment above $0 is documented | $200 |
| FHA | 0.5% of the balance | $200 |
| VA | 5% of the balance ÷ 12, or the reported payment if higher. A loan deferred at least 12 months past closing can be left out. | $166.67 |
| USDA | 0.5% of the balance | $200 |
On a $10,000 monthly income, a $200 student loan payment adds 2 percentage points to your DTI. Read more about why unpaid student loans can raise your DTI.
Debts a lender can leave out
Some debts can drop out of the calculation:
- Installment loans close to payoff: Fannie Mae requires an installment debt in DTI when more than 10 payments remain. A debt with fewer payments left should still count if it significantly affects your ability to pay your bills. USDA can leave out such a debt when its payment is no more than 5% of your monthly income. VA treats debts lasting 10 months or more as long-term debts, but it still weighs shorter ones.
- Debts someone else pays: Fannie Mae lets a lender exclude a non-mortgage debt, a co-signed loan for example, when another party has paid it for the most recent 12 months. You need 12 months of that person’s canceled checks or bank statements with no late payments.
- 30-day charge accounts: Fannie Mae does not require these in DTI because the balance is paid in full every month.
What does not count
The agency guides list the obligations that count, and everyday living costs are not on the list. So utilities, cell phone and internet bills, groceries, child care, and auto, health or life insurance do not enter your DTI.
What income counts in your debt-to-income ratio
Lenders use gross income that is stable and documented. Fannie Mae calls it “stable monthly income.” In practice, that means income with a track record and a reason to expect it to continue.
Salary and hourly wages are the simplest. Overtime, bonuses and commissions are usually averaged over time, and a lender may not count variable income it cannot document. Self-employed borrowers qualify on income from tax returns after business expenses, so a large write-off can raise DTI. See how lenders calculate self-employed income.
Debt-to-income ratio limits by loan type
Each program sets its own ceiling, and an individual lender can set a lower one. A lender’s stricter rule is called an overlay.
| Loan type | Standard DTI limit | Higher limit possible |
|---|---|---|
| Conventional (Fannie Mae) | 36% total, manual underwriting | 45% manual with credit score and reserve requirements; 50% through Desktop Underwriter |
| Conventional (Freddie Mac) | 36% total, manual underwriting | 45% manual with a written justification; no fixed cap with an automated Accept |
| FHA | 31% housing / 43% total, manual underwriting | Up to 40% / 50% with two compensating factors; higher with an automated approval |
| VA | 41% total | Above 41% with strong residual income |
| USDA | 29% housing / 41% total | 32% / 44% with a ratio waiver and a credit score of 680 or higher |
Conventional loans
Fannie Mae’s Selling Guide caps total DTI at 36% for manually underwritten loans. The cap rises to 45% when the borrower meets the credit score and reserve requirements in Fannie Mae’s Eligibility Matrix. Through Desktop Underwriter (DU), Fannie Mae’s automated system, the maximum is 50%.
Freddie Mac’s Guide sets no fixed DTI cap for a loan that gets an Accept from Loan Product Advisor (LPA), its automated system. LPA weighs the ratio with the rest of the file. For a manually underwritten loan, Freddie Mac’s guideline is 36%. The lender can go up to 45% with a written justification, and above 45% the loan is not eligible. See the conventional loan guide for down payment and credit details.
FHA loans
HUD’s Handbook 4000.1 sets these ratios for manually underwritten FHA loans:
- Credit score below 580, or no score: 31% / 43%, with no exceptions.
- 580 or higher, no compensating factors: 31% / 43%.
- 580 or higher, one compensating factor: 37% / 47%.
- 580 or higher, no discretionary debt: 40% / 40%.
- 580 or higher, two compensating factors: 40% / 50%.
Compensating factors include cash reserves, a minimal increase in housing payment, significant additional income not counted in qualifying income, and residual income. For reserves to count, a buyer of a one- or two-unit home needs at least three months of mortgage payments left after closing.
Most FHA loans go through FHA’s TOTAL Mortgage Scorecard first. If it returns an “Accept,” the manual table does not apply, and the loan can be approved above 43%. A lender can still set its own cap for those files. More in our FHA loan guidelines.
VA loans
VA’s standard is a total DTI of 41% or less (38 CFR 36.4340). VA also uses residual income: the cash left each month after the mortgage, debts, taxes and estimated maintenance and utilities, compared with a table by region and family size.
A veteran can go above 41%. If residual income exceeds VA’s guideline by at least 20%, the lender can approve the loan without a written justification. Otherwise, a supervisor must sign off with a written reason. See our VA home loan guide.
USDA loans
USDA’s Handbook HB-1-3555 sets a 29% housing ratio and a 41% total ratio. With a credit score of 680 or higher, a ratio waiver can allow 32% and 44%. See the USDA loan guide for income and location rules.
Jumbo and non-QM loans
A jumbo loan is above the conforming limit, which is $832,750 for a one-unit home in most of the country in 2026. Fannie Mae and Freddie Mac rules do not apply, so each lender or investor sets its own DTI cap and reserve rules.
Non-QM loans fall outside the federal Qualified Mortgage definition. Some allow a higher DTI or qualify you on bank statements instead of tax returns. Expect a higher rate and a larger down payment than on an agency loan. See our non-QM loan guide.
Now that you know which limit applies to your loan type, check what lenders offer for your numbers.
The 43% Qualified Mortgage limit no longer applies
Older articles say federal rules cap DTI at 43%. That was true for the original General Qualified Mortgage (QM) definition. The Consumer Financial Protection Bureau (CFPB) has since replaced it.
The CFPB’s revised General QM rule took effect on March 1, 2021, and lenders had to comply by October 1, 2022. It removed the 43% DTI cap. Instead, a loan generally qualifies when its APR exceeds the average prime offer rate (a benchmark of typical rates) by less than 2.25 percentage points. Smaller loans get higher thresholds.
So for a borrower today, no single federal DTI number blocks a mortgage. The program limits above still apply. Lenders must also still consider your DTI or residual income and verify your income and debts.
What a good debt-to-income ratio looks like in practice
A back-end DTI of 36% or less fits every limit in this guide, including Fannie Mae’s manual underwriting standard. Between 36% and 45%, approval usually depends on automated underwriting findings, credit score and reserves. Above 45%, options narrow to DU approvals up to 50%, FHA files with strong compensating factors, VA loans with strong residual income, or non-QM loans.
DTI works together with your other numbers. Say two buyers both have a 47% DTI. One has a 760 credit score, 20% down and six months of payments in savings. The other has a 620 score, 3.5% down and no savings. The first buyer is far more likely to get an automated approval, because the system weighs the whole file.
DTI mostly affects approval. Its direct effect on price is smaller. In May 2023, the Federal Housing Finance Agency (FHFA) rescinded a planned Fannie Mae and Freddie Mac fee for borrowers with a DTI above 40% before it took effect. Even so, a lender can add its own overlays for high-DTI files.
How to lower your DTI before you apply
These moves can lower your debt-to-income ratio. Each one has a cost, so weigh it against your down payment and reserves.
- Pay down credit cards. A lower balance usually means a lower minimum payment. It can also help your credit score, because amounts owed make up 30% of a FICO score. However, cash spent on cards cannot go toward the down payment or reserves.
- Pay off installment loans near the end. A car loan with a few payments left can cost little to clear. In the example above, paying off the $450 car payment drops the back-end ratio from about 39.7% to 35.2%. Ask your lender first, because a debt with 10 or fewer payments left may not count under Fannie Mae rules anyway.
- Avoid new debt. A new car loan, lease or store card before closing raises DTI and can force the lender to rerun your approval.
- Add a co-borrower. A spouse or partner adds income, but the lender also adds their debts. Both of you become liable for the full loan.
- Borrow less. A larger down payment or a cheaper home lowers the payment. At 7.32% on a 30-year loan, each $10,000 less borrowed cuts principal and interest by about $69 a month. Putting 20% down on a conventional loan also removes private mortgage insurance.
- Change your student loan plan. An income-driven repayment plan can lower the payment lenders count, especially with Fannie Mae. The trade-off is a longer payoff and, often, more total interest.
Run the numbers with our guide on how much house you can afford before you choose a strategy.
Debt-to-income ratio FAQ
Is rent included in DTI?
No, when you buy a home you will live in. The new mortgage payment replaces your rent in the calculation. A lender may still review your rent history as part of your credit profile.
Are utilities included in DTI?
No. Lenders treat utilities, phone bills, groceries and car insurance as living costs and leave them out. VA’s residual income test is the one place estimated utilities enter the analysis.
What is the max DTI for an FHA loan?
For a manually underwritten FHA loan, the standard is 31% housing and 43% total. With two compensating factors and a credit score of 580 or higher, HUD allows up to 40% and 50%. An automated “Accept” from FHA’s TOTAL Mortgage Scorecard can go higher, subject to lender overlays.
Does DTI affect your credit score?
No. FICO scores do not consider income, so they cannot measure DTI. However, the balances that drive DTI also show up in the “amounts owed” part of your score.
Check your debt-to-income ratio before a lender does
Pull your credit report, list every monthly payment it shows, and add the full housing payment for the home you want. Then divide by your gross monthly income. If the result sits near your loan type’s limit, the fixes above work best with a few months of lead time.
When your numbers look right, get a preapproval so a lender can run your file through automated underwriting. Our mortgage preapproval guide covers the documents you will need.
