Mortgage education
What Is DTI (Debt-to-Income) and How Lenders Calculate It
Debt-to-income ratio, or DTI, is one of the first numbers a lender calculates — and one of the biggest factors in how much home you can buy. Here's exactly how it works and how to improve it.
The simple definition
Your DTI is your total monthly debt payments divided by your gross (before-tax) monthly income, expressed as a percentage. If you earn $6,000 a month and your debts total $2,400 a month, your DTI is 40%. Lenders use it to judge whether you can comfortably take on a mortgage payment on top of what you already owe.
Front-end vs. back-end DTI
Lenders actually look at two versions:
- Front-end DTI counts only your housing payment (principal, interest, taxes, insurance, and any HOA) against your income.
- Back-end DTI counts your housing payment plus all your other monthly debts — car loans, student loans, credit card minimums, and similar.
The back-end number is usually the one that matters most, because it reflects your total obligations.
Which debts count — and which don't
Lenders generally include recurring debts that show on your credit report: auto loans, student loans, minimum credit card payments, personal loans, and other mortgages. They generally do not include things like utilities, insurance premiums, groceries, or streaming subscriptions. This surprises people — your DTI isn't your whole budget, just your reported debt obligations against income.
Typical DTI limits by loan type
Every program is different, and these are general ranges rather than promises, but as a rough guide:
- Conventional loans often look for a back-end DTI around 43–45%, sometimes higher with strong compensating factors.
- FHA loans can allow higher DTIs in many cases, given other strengths in the file.
- Some programs qualify you a completely different way — for example, DSCR loans for investors look at the property's rent instead of your personal DTI.
The takeaway: a high DTI on one program might be fine on another. That's a big reason working the whole market beats being stuck with one lender's rules.
How to lower your DTI before applying
- Pay down revolving debt. Knocking out a credit card or two directly lowers your monthly obligations.
- Avoid new debt. Financing a car right before applying can push your DTI over the line.
- Pay off small loans entirely. Eliminating a payment can help more than reducing a big balance slightly.
- Increase documentable income if you can — though lenders want stable, provable income, not one-off boosts.
Want to see how a given payment affects your ratio? Our affordability calculator lets you plug in income and debts to estimate what you can borrow.
Your situation is what matters
If your DTI is close to the line, the right program can make the difference between a yes and a no. Tell us your numbers and we'll show you where you actually stand.