The short answer
- DTI = monthly debt payments ÷ gross monthly income.
- Front-end DTI counts housing only; back-end DTI counts all debts, housing included.
- Conventional loans go up to 50% through Fannie Mae’s Desktop Underwriter; FHA’s standard is 31/43; VA’s guideline is 41%.
- Under 36% is comfortable for most budgets.
Front-end and back-end DTI
Lenders look at two ratios. The front-end ratio (or housing ratio) is your total housing payment divided by gross monthly income. The back-end ratio adds every other monthly debt payment. Here is a household earning $90,000 a year, or $7,500 a month, applying for a home with a $2,100 monthly payment:
- Housing payment (PITI and HOA)$2,100
- Front-end: $2,100 ÷ $7,50028.0%
- Car $350 + student loan $250 + cards $120$720
- All debts: $2,100 + $720$2,820
- Back-end: $2,820 ÷ $7,50037.6%
The housing payment means the new one, not your current rent: principal and interest, property tax, homeowners insurance, any mortgage insurance and HOA dues. The mortgage calculator adds these up for a given price and rate.
What counts as income
DTI uses gross income, before tax, 401(k) contributions and health insurance. Lenders count income that is stable, documented and likely to continue, usually for at least three years:
- Salary and hourly wages, from pay stubs and W-2s.
- Overtime, bonuses and commission, usually averaged over the past two years and only if they are likely to continue.
- Self-employment income, averaged from two years of tax returns, after business expenses.
- Social Security, pensions, disability benefits, and alimony or child support you receive (if it will continue).
- Rental income, often at 75% of the rent to allow for vacancies and costs.
Non-taxable income, such as some Social Security benefits, can often be “grossed up” (Fannie Mae allows up to 25%), because it carries no income tax.
Which debts count
| Counts | Does not count |
|---|---|
| The new housing payment (PITI, mortgage insurance, HOA) | Utilities, phone and internet |
| Car loans and leases | Car, health and life insurance |
| Student loans, including deferred ones | Groceries, gas and other living costs |
| Credit card minimum payments | Card balances you pay off in full each month (the minimum still counts) |
| Personal loans and other mortgages | Medical bills you pay as you go |
| Child support and alimony you pay | Subscriptions and memberships |
Lenders take the payments from your credit report and your application. Co-signed loans count as yours unless you can show the other borrower has made the payments for the past 12 months.
Student loans, cards and other special cases
- Student loans at $0. FHA counts 0.5% of the outstanding balance when the credit report shows a $0 payment: $200 a month on a $40,000 balance. Fannie Mae can use a documented $0 income-driven payment; for loans in deferment or forbearance it uses 1% of the balance ($400 on $40,000) or a fully amortizing payment.
- Credit cards with no payment shown. Fannie Mae uses 5% of the balance if the credit report shows no minimum payment: $150 a month on a $3,000 balance.
- Loans nearly paid off. Fannie Mae can leave out installment debts with ten or fewer payments left, unless the payment is large enough to strain your budget. Car leases count however many payments remain.
The student loan calculator shows the payment on a standard plan if you are not sure what a lender will use.
Conventional loans: 36%, 45% and 50%
Most conventional mortgages are sold to Fannie Mae or Freddie Mac, so their rules set the limits. Fannie Mae’s Selling Guide says:
- For manually underwritten loans, the maximum back-end DTI is 36%.
- It can go up to 45% if the borrower meets the credit score and reserve requirements in Fannie Mae’s eligibility matrix.
- For loans approved through Desktop Underwriter (DU), its automated system, the maximum is 50%.
Most conventional loans go through DU, so 50% is the practical ceiling. DU weighs the whole file, and a high DTI is more likely to be approved with a good credit score, a larger down payment and savings left after closing. Fannie Mae sets no separate front-end limit.
FHA loans: 31% and 43%
FHA loans, insured by HUD, use FHA’s TOTAL Mortgage Scorecard for most approvals, which can accept higher ratios. When a loan is underwritten by hand, HUD Handbook 4000.1 sets these limits for borrowers with credit scores of 580 or more:
| Ratios | When allowed |
|---|---|
| 31% / 43% | No compensating factors needed |
| 37% / 47% | One compensating factor |
| 40% / 40% | No discretionary debt (no debts other than housing) |
| 40% / 50% | Two compensating factors |
Compensating factors include cash reserves, a new housing payment only a little higher than your current one, significant income not counted in the ratio, and residual income. Borrowers with scores from 500 to 579 are held to 31/43.
VA loans: 41% and residual income
VA loans for veterans and service members use 41% as a guideline, not a cap. Above 41%, the lender has to explain why the loan is still sound, usually by showing residual income well above VA’s minimum. Residual income is what is left each month after taxes, the housing payment, other debts and an allowance for maintenance and utilities. VA publishes minimums by family size and region, so a family with strong residual income can be approved well above 41%.
What happened to the 43% rule
You may read that 43% is the most a mortgage can allow. That came from the qualified mortgage (QM) rule that took effect in 2014. The CFPB replaced the 43% limit in the general QM definition with a test based on the loan’s price (its APR compared with average prime rates), and lenders had to follow the new definition from October 1, 2022. Lenders must still consider your DTI or residual income, and the 43% figure lives on as FHA’s standard back-end limit, but it is no longer a legal ceiling for most loans.
The 28/36 rule of thumb
The long-standing rule of thumb is to keep housing at or under 28% of gross income and all debts at or under 36%. It is stricter than most loan programs, which is the point: it leaves room in your budget for savings, childcare, repairs and the costs DTI ignores. Our home affordability calculator uses 28/36 to estimate a price range.
Approved is not the same as affordable
At a 50% back-end ratio, half your gross pay goes on debt before tax, retirement saving, food or utilities. A lender may approve it; your budget may not enjoy it.
Limits side by side
| Loan type | Front-end | Back-end | Notes |
|---|---|---|---|
| Rule of thumb | 28% | 36% | A budgeting guide, not a lender rule |
| Conventional, manual | None | 36% | Fannie Mae |
| Conventional, manual with strong file | None | 45% | Credit score and reserves per Fannie Mae's matrix |
| Conventional through DU | None | 50% | Automated approval |
| FHA, manual | 31% | 43% | Up to 40% / 50% with two compensating factors |
| VA | None | 41% | Guideline; residual income decides |
How much housing payment fits
Turn the limits around and they tell you the largest housing payment you can carry. For the household earning $7,500 a month with $720 of other debts, the highest housing payment under each limit is:
Under the 28/36 rule, the $2,100 payment is $120 too high once the other debts are counted: the household would need $7,833 a month of income for it to fit. Under every loan program, it fits.
How to lower your DTI
Take someone earning $5,000 a month with a $1,600 housing payment and $900 of other debts, including a $400 car payment. Their ratios are 32% and 50%, right at the conventional ceiling.
- Other debts
- $500
- Back-end DTI
- 42%
- Income
- $5,500
- Back-end DTI
- 45.5%
- Pay off small loans or loans with few payments left: removing a whole payment moves DTI the most.
- Pay down credit cards to cut minimum payments. The debt payoff calculator compares snowball and avalanche plans.
- Add a co-borrower whose income is counted (their debts count too).
- Lower the housing payment: a cheaper home, a bigger down payment or a lower rate.
- Hold off on new car loans or store cards until after closing.
Applying with a co-borrower
When two people apply together, lenders add both incomes and both sets of debts. Suppose the $90,000 earner from the example applies with a partner who earns $40,000 a year and has a $300 car payment. Gross income rises to $10,833 a month and other debts to $1,020, so the same $2,100 housing payment gives ratios of 19.4% and 28.8%. Under the 28/36 rule, the highest housing payment that fits rises from $1,980 to $2,880.
A co-borrower helps most when they bring income and few debts. Their credit history counts too, so a co-borrower with weak credit can raise your rate or make approval harder even while improving your ratios.
DTI for car and personal loans
Mortgage lenders publish their limits; most car and personal loan lenders do not. Many still check DTI, and a high ratio can mean a smaller loan or a higher rate. Because the new payment is added to your existing debts, it helps to run the numbers before you shop: add the expected payment to your other debts and divide by your gross monthly income. If a new car payment would push you over a mortgage limit you hope to meet within a year or two, it may be worth waiting.
DTI when you rent
Landlords rarely work out a full DTI. Many look instead for gross income of about three times the rent, which is a rent-to-income ratio of about 33%. If you are planning to buy, your current rent does not count in your DTI, because the new mortgage payment replaces it. The rent affordability calculator works out a comfortable rent for your income.
DTI and your credit score
Credit scores do not include your income, so DTI is not part of your score. The two are linked, though: paying down card balances lowers both your DTI and your credit utilization, which can raise your score. Lenders look at DTI, score and down payment together, so strength in one can make up for weakness in another.
Self-employed and variable income
If you are self-employed, lenders usually average two years of net profit from your tax returns, after business expenses, so heavy write-offs lower the income that counts. A falling trend can reduce it further. If you earn overtime, bonuses or commission, a two-year history helps. Before you apply, work out your DTI from the income on your returns, not from your best recent month.
Before you apply
- Pull your free credit reports and check every debt and payment is right.
- Work out your DTI with the new housing payment, not your rent.
- Get documents ready: two years of W-2s or tax returns, recent pay stubs and student loan statements showing your payment.
- Avoid opening new credit until after closing.
- Ask lenders which limit they apply: many set overlays stricter than Fannie Mae, FHA or VA.