DTI stands for Debt-to-Income ratio. It's one of the most important numbers in your mortgage application — and one most people have never heard of until they're already in the process.
What DTI actually means
DTI is the percentage of your gross monthly income that goes toward monthly debt payments. There are two versions lenders look at:
- Front-end DTI: Just your housing payment (P&I + taxes + insurance + HOA + PMI) divided by gross monthly income.
- Back-end DTI: All monthly debts (housing + car payments + student loans + credit card minimums + any other installment debt) divided by gross monthly income.
Example: You earn $6,000/month gross. Your new mortgage payment would be $1,800/month and you have $400/month in car and student loan payments. Your back-end DTI = ($1,800 + $400) / $6,000 = 36.7%. Most lenders are fine with that.
DTI limits by loan type
- Conventional: Typically max 45%, sometimes up to 50% with strong compensating factors (high credit score, large down payment, reserves).
- FHA: Max 43% standard, up to 57% with strong compensating factors.
- VA: No hard maximum, but lenders typically prefer under 41%.
- USDA: 41% back-end is the standard target.
How to lower your DTI
You have two levers: increase income or decrease debt. Paying off a car or credit card before applying can make a significant difference. Even paying down a credit card minimum from $150 to $0 moves your DTI meaningfully on a tight budget. A co-borrower with income can also help.
DTI limits vary by lender and loan program. A licensed loan officer can help you understand your specific qualifying ratios.