Debt-to-Income Ratio (DTI)

A percentage showing how much of your income goes toward monthly debt obligations.

How lenders use DTI

Lenders add up your proposed housing payment plus recurring monthly obligations like car loans, student loans, credit cards, and personal loans. That total is divided by your gross monthly income to produce your DTI.

Example

If your total monthly debts are $3,000 and your gross monthly income is $7,500, your DTI is 40%. The lower the ratio, the easier it is to qualify and the more flexibility you usually have on other parts of the file.

Why the limit depends on the program

Conventional loans are usually stricter than FHA on DTI. Government and alternative-income programs can stretch further when there are strong compensating factors such as reserves, higher credit, or significant residual income.

Related glossary terms

• Debt Service Coverage Ratio (DSCR) - A ratio that compares a property's rent to its monthly mortgage-related expenses.
• Mortgage Insurance Premium (MIP) - The FHA version of mortgage insurance.
• Private Mortgage Insurance (PMI) - Conventional-loan mortgage insurance that is typically required below 20% down.

Related loan programs

• Conventional Loans - Conventional loans aren't backed by a government agency, follow Fannie Mae and Freddie Mac guidelines, and reward strong credit with the lowest rates and most flexible terms available.
• FHA Loans - FHA loans are insured by the Federal Housing Administration and let you buy with as little as 3.5% down and a 580 credit score, making them a top choice for first-time buyers and credit rebuilders.
• USDA Loans - USDA loans are backed by the U.S. Department of Agriculture and offer 100% financing for low- to moderate-income buyers in eligible rural and suburban areas.

Learn more

• 📰 Mortgage Basics: What You Need to Know
• 📊 How Credit Scores Impact Your Mortgage Rate