What Is a Debt-to-Income Ratio for a Mortgage?

Your DTI ratio includes any recurring monthly debt payments. Lenders use these financial obligations to determine how much of your income is already committed before adding a mortgage payment. These typically include:

• Mortgage (or rent if applicable)
• Auto loans
• Student loans
• Credit card minimum payments
• Personal loans
• Child support or alimony payments
• Any other loan payments that show up on your credit report

When calculating your DTI, lenders generally exclude expenses you pay that are not considered long-term debts. Examples of DTI exclusions may include:

• Utilities (electricity, water, gas)
• Phone, internet, and cable bills
• Groceries and other household expenses
• Health and auto insurance premiums
• Subscriptions and entertainment expenses

Lenders typically consider any verifiable income when calculating your DTI, including:

• Salary or hourly wages
• Self-employment income (with proper documentation)
• Bonuses and commissions
• Rental income (with proof of consistency)
• Social Security, disability, or pension payments
• Alimony or child support (if documented and reliable)

Lenders use gross income — your earnings before taxes and deductions — to calculate your DTI. This is because it provides a standardized measure of affordability across borrowers. While your net income (your take-home pay) is what you actually receive, lenders rely on gross income for consistency in underwriting.

No, DTI requirements vary by lender and loan type. Conventional loans typically require a 43% or lower back-end DTI, but some programs allow higher ratios based on compensating factors, such as high credit scores or substantial savings. FHA loans, VA loans, and other government-backed programs may have more flexible DTI guidelines.

It’s possible, but it depends on the lender and loan program. Some lenders approve borrowers with DTIs above 43%, especially if they have strong credit, substantial assets, or a high down payment. Government-backed loans, like FHA or VA loans, may allow DTIs up to 50% or higher in certain cases.

A lower DTI ratio often leads to better loan terms, including lower interest rates. Lenders view borrowers with a high DTI as riskier, which can result in higher interest rates or stricter loan conditions. Keeping your DTI below lender thresholds may help you secure a more affordable mortgage.

If you are currently renting, your rent payment is not included in your DTI when applying for a mortgage. However, lenders will calculate your estimated future mortgage payment (including taxes, insurance, and HOA fees) when determining your DTI for the loan.

Yes. Different loan programs have varying DTI limits. For example, for manually underwritten loans, Fannie Mae’s maximum DTI ratio is 36%. If a borrower meets its credit score and reserve requirements, this maximum can be exceeded up to 45%.

Government-backed loans, such as FHA, V, and USDA, typically, allow higher debt-to-income ratios — sometimes up to 50% or a bit more, especially for borrowers with a high credit score and/or substantial savings.

Maybe. If you co-signed a loan (e.g., for a child or other family member), you may be able to exclude it if you can prove the primary borrower has made all payments for at least 12 months without your help. Otherwise, the debt typically must be included in your DTI calculation.

In most cases, yes, paying off a debt before applying for a mortgage can lower your DTI ratio. This will often improve your chances of approval. However, it’s important to do this before your lender runs your final credit check, as paying off a loan mid-process may not reflect in time.

Yes. Your DTI ratio changes as your income and debts change. Once you take on a mortgage, your housing costs will likely increase, impacting your overall financial picture. If you take on new debts after buying a home, your DTI ratio will likely rise, which could affect future borrowing power for refinancing or other loans.