Debt-to-Income Ratio: The Number That Can Make or Break Your Mortgage

By Daniel Ramirez

Key Takeaways

  • Your Debt-to-Income (DTI) ratio is a key factor lenders use to assess your ability to repay a mortgage, calculated by dividing your total monthly debt payments by your gross monthly income.
  • Common DTI limits for conventional loans range from 43-45%, FHA from 43-50%, and Jumbo loans typically fall between 38-43%, while VA loans use a different metric.
  • Strategies to lower your DTI include paying down existing debts, avoiding new debt, increasing your income, or opting for a less expensive home to reduce your proposed mortgage payment.
  • Even credit cards with zero balances can impact your DTI, as lenders might calculate potential payments based on available credit limits.

What Is Debt-to-Income Ratio?

Your debt-to-income (DTI) ratio is one of the most important numbers in your mortgage application. It tells lenders how much of your income goes toward debt payments.

How DTI Is Calculated

DTI = (Monthly Debt Payments ÷ Gross Monthly Income) × 100

Include these debts:

  • Proposed mortgage payment (PITI)
  • Car loans
  • Student loans
  • Credit card minimum payments
  • Personal loans
  • Child support/alimony

DTI Requirements by Loan Type

Loan Type Max DTI

Conventional 43-45%

FHA 43-50%

VA No strict limit*

Jumbo 38-43%

*VA loans use residual income instead

7 Ways to Lower Your DTI

  • Pay down credit cards - Focus on cards with highest payments
  • Avoid new debt - Don't finance a car before buying a home
  • Increase income - Document raises, bonuses, or side income
  • Pay off small loans - Eliminate payments entirely
  • Extend loan terms - Lower monthly payments (if refinancing other debt)
  • Add a co-borrower - Combine incomes
  • Choose a less expensive home - Lower mortgage payment

The Hidden DTI Trap

Credit cards with $0 balances still count if you use them. Lenders may calculate potential payments based on available credit.

Get Your Numbers Right

Before applying, talk to our team to calculate your exact DTI and identify improvement opportunities.

Frequently Asked Questions

What is a good debt-to-income ratio for a mortgage?

While it varies by loan type, a DTI ratio below 36% is often considered ideal, with no more than 28% of that going towards housing costs. Many conventional loans allow up to 43-45%, and some FHA programs permit up to 50%, depending on other financial factors.

How do I calculate my debt-to-income ratio?

To calculate your DTI, sum all your recurring monthly debt payments (including proposed mortgage, car loans, student loans, and minimum credit card payments). Then, divide this total by your gross monthly income and multiply by 100 to get a percentage. This provides your DTI ratio.

Does DTI affect mortgage approval?

Yes, DTI significantly impacts mortgage approval. Lenders use it to determine if you can comfortably afford your monthly mortgage payments in addition to your existing debts. A high DTI can indicate a higher risk, potentially leading to denial or less favorable loan terms.