Debt-to-income ratio (DTI) for mortgages
What DTI do you need to buy a house?
Your debt-to-income ratio (or "DTI") is a number mortgage lenders look at when you are buying or refinancing a house. Lenders use your debt-to-income ratio to help them decide if you qualify for a home loan as well as to determine how much money they might be willing to offer you.
How to calculate debt-to-income ratio
Debt-to-income ratio is calculated using a simple formula. Take the total of your monthly debt payments, divide this total by your monthly income, and express the result as a percentage. Look at these examples:
|Total Monthly Debt Payments||Monthly Gross Income||Debt-to-Income Ratio (numeric)||Debt-to-Income Ratio (%)|
You should count all debts toward your total monthly debt payments. Include rent and mortgage, credit card, auto loan, student loan, insurance, child support, and alimony payments in your total. Your monthly gross income may include wages earned, plus tips and bonuses if applicable, social security income and pension payments, child support and alimony (if you wish this income to be considered).
Once you have these totals, divide your total monthly debt payments by your monthly gross income to calculate your debt-to-income ratio. You can also use our debt-to-income calculator to estimate your DTI.
Debt-to-Income Ratio (DTI) Calculator
Use our calculator to estimate your debt-to-income ratio. Enter your total monthly debt payments and your monthly income to calculate your DTI!
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Your DTI is
What debt-to-income ratio do you need to buy a house?
Lenders often require a maximum debt-to-income ratio between 36% and 43% to approve you for a mortgage to buy a house. Some lenders may accept a debt-to-income ratio of 45% or higher when you are buying a home with a conventional loan, but these higher DTIs usually come with higher credit and income requirements.
Keep in mind that lenders will include the estimated cost of your monthly mortgage payment when they calculate your debt-to-income ratio. This is important to understand because if this estimated payment is higher than your current housing costs, from either your current mortgage payment or your monthly rent, your debt-to-income ratio is likely to increase.
What is a good debt-to-income ratio for mortgages?
Financial professionals often recommend keeping your debt-to-income ratio under 36% when you are applying for a mortgage. This is the number Fannie Mae uses as a maximum DTI for many of its loans1. The reason lower debt-to-income ratios are considered good is because they usually indicate you have more money available to deal with unexpected expenses like car repairs, home repairs, and medical bills.
Mortgage lenders consider lower debt-to-income ratios good for the same reasons. A low DTI means you can comfortably pay your expected monthly mortgage expenses, with money left over to cover unexpected bills. As a result, lenders often see borrowers with low DTIs as good customers whose business they try to win with competitive interest rates or better terms. A good debt-to-income ratio may improve your chances of getting approved for a mortgage to buy or refinance a home too.
Debt-to-income ratio and mortgage affordability
Your debt-to-income ratio can have an impact on how much house you can afford to buy because DTI may affect how much money a lender might be willing to let you borrow. If you start with a higher debt-to-income ratio, lenders may be willing to loan you less money than they would if you have a lower DTI. A good way to figure out how your debt-to-income ratio might affect the prices of homes you can afford is to get prequalified for a mortgage.
What’s the difference between front-end DTI and back-end DTI?
Mortgage lenders often look at your front-end and back-end debt-to-income ratios when they review your loan application. Your front-end DTI includes just your housing costs in relation to your income. Lenders frequently want your front-end debt-to-income ratio to be below 28%.
Your back-end DTI includes your housing costs as well as the cost of other monthly debt payments on student loans, car loans, credit cards, and more in relation to your income. Mortgage lenders frequently want your back-end debt-to-income ratio to be below 36%.
How do you lower your debt-to-income ratio?
If your DTI is over 36%, you may need to lower it before you can get approved for a mortgage. Paying down your current debts and increasing your income are two ways you can improve your DTI. Avoiding new debt and not making large purchases on credit can help as well.
- Fannie Mae, Debt-to-Income Ratios (05/18/2022) from their "Selling Guide" published May 4, 2022
Last reviewed and updated April 2023 by Freedom Mortgage Corporation.