Debt-to-Income Ratio (DTI)
DTI compares your monthly debt payments to your gross monthly income. Lenders use this to determine how much you can borrow.
Formula
DTI = Total Monthly Debts / Gross Monthly Income × 100
Two Types
- Front-end DTI: Housing costs only (mortgage, taxes, insurance)
- Back-end DTI: All debts (housing + car loans, student loans, credit cards)
Lender Guidelines
| Loan Type | Max DTI |
|---|---|
| Conventional | 43-45% |
| FHA | 50% |
| VA | 41% (flexible) |
Tips to Improve DTI
- Pay down existing debts before applying
- Increase income (rental income counts at 75%)
- Avoid new debt before closing