Debt-to-Income Ratio Calculator

For a mortgage, a back-end DTI of 36 % or less is generally considered good and 28 % or less excellent; that is the traditional 28/36 guideline. Many lenders approve higher ratios: Fannie Mae's Desktop Underwriter can go to 50 % and FHA's manual-underwriting benchmark is 43 %. A Qualified Mortgage no longer has a fixed 43 % ceiling since the CFPB's General QM rule took effect on 1 October 2022, but lenders must still consider your DTI or residual income.

Lenders count every recurring obligation on your credit report: car loans, student loans (see the 1 % deferment rule), the minimum monthly payment on each credit card, personal loans, child support and alimony paid, and co-signed loans. Not counted: utilities, phone, insurance, subscriptions, groceries and general living expenses. For revolving accounts, the minimum payment — not your actual payment or the balance — enters the calculation (Fannie Mae Selling Guide B3-6-05).

Lenders use gross (pre-tax) monthly income: base salary, documented overtime and bonuses with a two-year history, self-employment net income averaged over two years of tax returns, and typically 75 % of gross rental income. Social Security, pension and disability income count in full when documented. One-off capital gains, unreimbursed expenses and income without a two-year history are usually excluded.

Under Fannie Mae's Selling Guide B3-6-02, a loan underwritten through Desktop Underwriter can have a back-end DTI up to 50 %. A manually underwritten loan is capped at 36 %, or 45 % with the credit score and reserves the guide requires. Freddie Mac's Loan Product Advisor uses similar risk-based limits. The 36 % guideline predates automated underwriting and is no longer a hard cap.

FHA's TOTAL Scorecard (automated underwriting) can approve back-end ratios above 43 %, sometimes well above, when the rest of the file is strong. For manually underwritten loans HUD Handbook 4000.1 sets 31 % front-end and 43 % back-end without compensating factors, rising to 37/47 % and 40/50 % with one or two documented compensating factors. Qualification depends on the AUS result, not one hard ceiling.

VA sets no hard back-end limit; the main test is residual income — money left after housing and all debts, compared with a table by family size and region. Under 38 C.F.R. §36.4340 and the VA Lenders Handbook Chapter 4, a ratio above 41 % needs residual income at least 20 % above the table or other compensating factors. Many VA loans are approved above 41 % when residual income is strong.

Both, but the back-end ratio is usually the binding one. Lenders check the front-end to confirm the housing payment is reasonable against income, and the back-end to judge the total debt load. If you track one number, track back-end DTI — it includes housing and every other obligation, so it captures the full picture and is the figure most programs quote.

Pay off or eliminate a monthly debt — even a small one lowers the ratio directly. If an installment loan has ten or fewer payments left, ask whether it can be excluded (Fannie Mae allows this in some cases). Avoid new credit before applying. A documented raise generally counts right away for W-2 employees; self-employment income needs two years of history. Do not close credit card accounts just before applying — it can lower your available credit and your score.

No. The 43 % back-end cap in 12 C.F.R. §1026.43 was replaced by the CFPB's General QM Final Rule, mandatory from 1 October 2022: a loan now qualifies by its price (APR within set margins of the average prime offer rate), and the lender must consider and verify DTI or residual income without a fixed ceiling. 43 % survives as FHA's manual-underwriting benchmark and as a common lender rule of thumb, which is why this calculator keeps it as the default target.

For a conventional loan, Fannie Mae has lenders use 1 % of the outstanding balance as the monthly payment when the loan is deferred or in forbearance, unless the servicer documents a fully amortising payment (Selling Guide B3-6-05). A $40,000 deferred loan therefore adds $400 a month. In the third worked example that one line takes back-end DTI from 35.8 % to 41.9 %. Enter the 1 % figure in the student loan field.