A good debt-to-income ratio is generally 36% or lower: at that level, monthly debt payments use about a third of gross income, and borrowers meet even the strictest common mortgage standards. Many lenders accept more. Fannie Mae allows up to 50% for loans approved through its Desktop Underwriter system, and FHA guidelines start at 43%.
DTI is one of the main numbers lenders check, alongside credit history, savings and the loan itself. It measures how much of your income is already committed to debt.
What is a debt-to-income ratio?
The Consumer Financial Protection Bureau defines DTI as all monthly debt payments divided by gross monthly income, meaning income before taxes and other deductions.
DTI = Total monthly debt payments ÷ Gross monthly income × 100
Payments usually counted include:
- Mortgage or rent-replacement housing payment (principal, interest, taxes, insurance, HOA dues)
- Auto loans and leases
- Student loans
- Minimum payments on credit cards
- Personal loans
- Child support or alimony you pay
Everyday costs such as utilities, groceries, phone bills and subscriptions are generally not counted.
What is the difference between front-end and back-end DTI?
| Ratio | What it includes | Also called |
|---|---|---|
| Front-end DTI | Housing payment only (principal, interest, taxes, insurance, HOA) | Housing ratio |
| Back-end DTI | Housing payment plus all other monthly debt payments | Total DTI |
Front-end DTI shows whether the home itself is affordable. Back-end DTI shows the total debt load. When people say "DTI" without a qualifier, they usually mean back-end DTI.
What DTI do mortgage lenders accept?
Limits depend on the loan program and on how the loan is underwritten. The figures below come from each program's published guidelines.
| Program | Front-end (housing) limit | Back-end (total) limit |
|---|---|---|
| Fannie Mae conventional, manually underwritten | Not specified | 36%; up to 45% with required credit score and reserves |
| Fannie Mae conventional, Desktop Underwriter | Not specified | Up to 50% |
| FHA, manual underwriting, no compensating factors | 31% | 43% |
| FHA, manual underwriting, one compensating factor (score 580+) | 37% | 47% |
| FHA, manual underwriting, two compensating factors (score 580+) | 40% | 50% |
FHA compensating factors include cash reserves, a minimal increase in housing payment, significant additional income not used to qualify, and residual income. Loans approved through automated underwriting systems can be approved with different ratios than the manual limits above.
Where does the 43% figure come from?
The 43% number is widely quoted because the CFPB's original Ability-to-Repay rule used a 43% DTI cap in the definition of a General Qualified Mortgage (QM). In December 2020, the CFPB issued a final rule that removed the 43% limit and replaced it with price-based thresholds. Compliance with the new definition became mandatory on October 1, 2022.
As a result, 43% is no longer a hard limit in the General QM definition. It remains a common benchmark, and it is still the FHA total-ratio limit for manual underwriting without compensating factors.
How do you read your DTI?
These bands are rules of thumb drawn from the program limits above, not official categories:
| Back-end DTI | What it usually means |
|---|---|
| 36% or less | Meets even the strictest common limit (Fannie Mae manual underwriting) |
| 37% – 43% | Accepted by many programs; less room for new debt |
| 44% – 50% | Near the upper limit of major programs; often requires compensating factors or automated approval |
| Above 50% | Above the maximums listed for Fannie Mae and FHA programs |
A lower DTI also leaves more cash each month for savings and unexpected costs, which matters regardless of whether a lender would approve a loan.
Worked example: calculating front-end and back-end DTI
A borrower earns $78,000 a year before taxes.
- Gross monthly income: $78,000 ÷ 12 = $6,500
Monthly payments:
| Payment | Amount |
|---|---|
| Proposed mortgage (principal, interest, taxes, insurance) | $1,750 |
| Car loan | $400 |
| Student loan | $250 |
| Credit card minimums | $100 |
| Total | $2,500 |
- Front-end DTI: $1,750 ÷ $6,500 = 26.9%
- Back-end DTI: $2,500 ÷ $6,500 = 38.5%
The front-end ratio is below the FHA 31% housing limit. The back-end ratio is above Fannie Mae's 36% manual-underwriting limit and below the FHA 43% limit and the 50% Desktop Underwriter limit.
To reach 36% total DTI at this income, total monthly debt would need to be $2,340 or less ($6,500 × 0.36), which is $160 less than now.
For hourly workers, converting pay to an annual figure is the first step. $78,000 a year is $37.50 an hour at 2,080 hours (40 hours × 52 weeks).
How can you lower your debt-to-income ratio?
DTI has two parts, so there are two levers: reduce monthly debt payments or increase gross income.
Reduce monthly payments
- Pay off small balances. Eliminating a debt removes its payment from the ratio entirely. In the example above, paying off the car loan and credit cards drops total debt to $2,000 and back-end DTI to 30.8%.
- Pay down revolving balances. Lower credit card balances usually mean lower minimum payments.
- Avoid new debt before applying. A new car loan or card balance raises DTI right before underwriting.
- Refinance or consolidate. A longer term or lower rate can reduce the monthly payment, though a longer term can raise total interest paid.
- Choose a less expensive home. A smaller loan, larger down payment or lower property taxes reduce the housing payment that counts in both ratios.
Increase documented income
- Add a co-borrower whose income counts toward the loan.
- Document all qualifying income, such as bonuses, overtime or self-employment income with the history lenders require.
- Raise base pay through a raise, new job or additional steady work.
This guide is for education only and is not financial advice.