What Is Debt-to-Income Ratio?

Your debt-to-income ratio (DTI) is your total monthly debt payments, including the new mortgage payment, divided by your gross monthly income, meaning your pay before taxes. Lenders use it to set the largest mortgage payment you can take on: Fannie Mae's automated approval allows up to 50%, VA and USDA use 41% as their benchmark, and FHA's limit on a manually underwritten loan is 43% unless you have compensating factors. On a $90,000 salary with $800 a month in other debts, those limits allow a total housing payment of about $2,275 to $2,950 a month.

How do you calculate front-end and back-end DTI?

Lenders can look at two ratios, both based on gross monthly income:

• Front-end ratio (housing ratio): your monthly housing payment divided by gross monthly income. The housing payment includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues.
• Back-end ratio (total DTI): your housing payment plus all other monthly debt payments, divided by gross monthly income. When a lender says "DTI" without a qualifier, it means this one.

Example. You earn $90,000 a year, or $7,500 a month before taxes.

• Proposed housing payment: $1,600 principal and interest + $350 property taxes + $150 insurance = $2,100
• Other debts: $450 car loan + $250 student loan + $100 credit card minimum = $800
• Front-end ratio: $2,100 / $7,500 = 28.0%
• Back-end ratio: ($2,100 + $800) / $7,500 = 38.7%

That 38.7% fits Fannie Mae's automated limit, VA's 41% benchmark, and FHA's 43% manual limit, but it is above Fannie Mae's 36% limit for a manually underwritten loan unless you meet its credit score and reserve requirements for up to 45%.

What counts as debt in your DTI?

The lender uses the payments on your credit report and loan documents, not your actual spending. Under Fannie Mae's rules:

• Credit cards: the minimum payment on your credit report. If none is reported, the lender can use 5% of the balance.
• Car loans, personal loans, and other installment debt: counted when more than 10 payments remain. A loan with 10 or fewer payments left can be dropped unless the payment would still strain your budget.
• Car leases: always counted, no matter how many months are left.
• Student loans: the payment on your credit report or latest statement. For deferred loans or loans in forbearance, the lender uses 1% of the balance or a monthly payment calculated to pay off the loan in full over its documented repayment term.
• Child support and alimony: counted when required by a court order or agreement and continuing more than 10 months. Alimony can instead be subtracted from your income.
• Other mortgages and rental losses: counted.

Utilities, phone bills, groceries, and car insurance are not in the ratio. Income is your stable gross income the lender can document. If you are self-employed, that is your business income after expenses, as shown on your tax returns; see how self-employed borrowers qualify.

What is the maximum DTI by loan type?

Compensating factors are strengths that offset a high ratio, such as cash savings left after closing or a new payment close to your current rent. Every FHA application goes through FHA's TOTAL Mortgage Scorecard first. If it returns an Accept, the handbook sets no fixed ratio cap and the lender relies on the scorecard's risk assessment of your whole file; if it returns a Refer, an underwriter applies the manual limits above. Your lender can also set stricter limits than these. Fannie Mae and Freddie Mac loan requirements and FHA loan requirements cover the other rules for each loan.

You may see 43% described as a legal maximum. Federal Qualified Mortgage rules did cap DTI at 43% until the CFPB replaced that cap with a pricing test effective March 1, 2021. Lenders must still consider your DTI or residual income, but 43% is no longer a federal limit.

How much can you borrow on your salary?

Lenders do not use a multiple of your salary. Your DTI limit, your other debts, and the interest rate decide the loan amount. To estimate it:

1. Divide your annual salary by 12 to get gross monthly income.
2. Multiply by the DTI limit for your loan type.
3. Subtract your other monthly debt payments. The result is your maximum housing payment.
4. Subtract property taxes, insurance, mortgage insurance, and HOA dues. The result is your maximum principal and interest payment.
5. Convert that payment to a loan amount at the current rate with a mortgage calculator.

Example. Using the $90,000 salary and $800 in debts from above, $500 a month for taxes and insurance, 20% down so there is no mortgage insurance, and a 30-year fixed rate of 7.32% (Freddie Mac's average for the week of October 22, 2026):

The same salary supports a loan of about 2.3 to 4 times income depending on the limit. Paying off the $450 car loan would raise each estimated loan amount by about $65,500. On an FHA or USDA loan, the housing ratio can cap you first: at USDA's 29%, the housing payment can be at most $2,175 ($7,500 x 29%) no matter how little other debt you have.

How can you lower your DTI before you apply?

1. Pay down credit card balances. A lower balance usually lowers the minimum payment the card reports, which is the number the lender uses.
2. Pay off or pay down an installment loan. Under Fannie Mae's rules, a loan with 10 or fewer payments left can be left out of the ratio. A car lease payment counts until the lease ends, so it cannot be dropped this way.
3. Document your actual student loan payment. Under Fannie Mae's rules, if you are on an income-driven repayment plan, the lender can use the verified payment, even $0, instead of 1% of the balance. FHA and USDA Guaranteed loans count 0.5% of the outstanding student-loan balance when the monthly payment is $0.
4. Avoid new debt before closing. A new car loan or financed furniture adds its payment to your ratio.
5. Add a co-borrower. A spouse or other co-borrower adds income, though their debts count too.
6. Lower the housing payment. A larger down payment, a less expensive home, or a home with lower taxes or HOA dues all shrink the payment in the ratio.

A mortgage preapproval shows the DTI and loan amount a lender calculated from your documents. DTI is one of several tests in how to qualify for a mortgage, along with credit score, down payment, and cash reserves. For how the loan itself works, see what a mortgage is.