How the debt-to-income ratio is calculated
Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income, the money you earn before taxes and deductions. Lenders look at two versions of it:
The example in the calculator earns $6,500 a month. Housing costs $1,740, so the front-end ratio is $1,740 ÷ $6,500 = 26.8%. With $690 in other payments, all debts come to $2,430 and the back-end ratio is 37.4%. That is above a 36 percent target: the same payments would need a gross income of $6,750 a month. Under 43 percent there is room for $365 a month in new payments.
Front-end vs back-end DTI
The front-end ratio, also called the housing ratio, counts only the housing payment. For a mortgage that is principal and interest plus property tax, homeowners and flood insurance, mortgage insurance and HOA dues; HUD's FHA handbook lists these, along with ground rent and special assessments, as the total mortgage payment. The back-end ratio adds every other monthly debt payment, so it is always at least as high.
Not every program uses both. Fannie Mae's Selling Guide sets only a total DTI maximum. FHA's manual underwriting sets a maximum for each, written as two numbers like 31/43: housing at most 31 percent, all debts at most 43 percent.
Which debts count
Fannie Mae's Selling Guide (section B3-6-05) lists the monthly obligations a lender includes. In short:
- Installment loans such as car, student and personal loans, when more than ten monthly payments remain. A loan with fewer payments left can still count if it significantly affects your ability to pay.
- Credit cards and other revolving accounts. If the credit report shows no minimum payment, the lender uses 5 percent of the balance.
- Lease payments, for a car or a home, no matter how many months are left.
- Alimony, child support and separate maintenance you must pay under a written agreement, when they continue for more than ten months.
- Deferred loans still count. For a deferred student loan, Fannie Mae allows 1 percent of the balance or a payment calculated from the loan terms. FHA uses 0.5 percent of the balance when the credit report shows a payment of zero.
Not counted: charge accounts you must pay in full every month. Living costs like utilities, phone bills and groceries are not on the list either. If you rent now and are applying for a mortgage, enter the new mortgage payment as housing, not your rent.
DTI limits by loan type
- Conventional loans sold to Fannie Mae: a maximum total DTI of 36 percent for loans underwritten by hand, up to 45 percent when the borrower meets the credit score and reserve requirements of Fannie Mae's eligibility matrix, and up to 50 percent for loans run through its automated Desktop Underwriter system.
- FHA loans underwritten by hand: the limits depend on the credit score and on compensating factors such as cash reserves, as in the table below.
- Qualified mortgages: the CFPB's ability-to-repay rule once capped a general qualified mortgage at 43 percent DTI. A final rule issued December 10, 2020 replaced the cap with limits on the loan's price compared with the average prime offer rate, mandatory from October 1, 2022. Lenders must still consider DTI or residual income.
| FHA manual underwriting | Housing / all debts |
|---|---|
| Credit score 500 to 579, or no credit score | 31/43 |
| 580 or more, no compensating factors | 31/43 |
| 580 or more, one compensating factor | 37/47 |
| 580 or more, no discretionary debt | 40/40 |
| 580 or more, two compensating factors | 40/50 |
Energy efficient homes may qualify for stretch ratios of 33/45. The CFPB itself does not name a single right number: different loan products and lenders have different limits.
How much new debt fits
The calculator turns your target into dollars. Room for new payments is target × gross monthly income − the debts you already pay. If the result is negative, you are over the target by that much a month. The income you would need for your current payments is debts ÷ target. Open the loan section and enter a rate and a term to see roughly how much a new loan with that payment could be, using the standard loan payment formula in reverse. With a housing target as well, it shows the highest housing payment that stays under both limits, a number you can take to the home affordability calculator or the mortgage calculator.
How to use the debt-to-income ratio calculator
- 1Enter your gross income per month or per year. Add a line for a second earner if they will be on the loan.
- 2Enter the housing payment and every other monthly debt payment: car loans, student loans, credit card minimums, personal loans, leases and support you pay.
- 3Pick a target like 36 or 43 percent. Read your front-end and back-end DTI, the room you have for new payments and how your ratios compare with Fannie Mae and FHA maximums. Copy the result or share a link.
Sources
- CFPB: What is a debt-to-income ratio?
- Fannie Mae Selling Guide B3-6-02: Debt-to-income ratios (36, 45 and 50 percent)
- Fannie Mae Selling Guide B3-6-05: Monthly debt obligations
- HUD Handbook 4000.1, Update 18 (August 12, 2026): approvable ratio requirements (II.A.5.d.viii), total mortgage payment (II.A.5.d.vii) and student loan payments (II.A.4.b.iv)
- CFPB: General QM final rule replaces the 43 percent DTI limit with a price test (December 10, 2020)
- CFPB: General QM mandatory compliance date of October 1, 2022
Frequently asked questions
What is a good debt-to-income ratio?
There is no single number. The Consumer Financial Protection Bureau notes that different loan products and lenders have different limits. For a conventional loan, Fannie Mae's standard maximum for manual underwriting is 36 percent, and FHA's manual underwriting starts at 31 percent for housing and 43 percent in total. A lower ratio leaves more room in your budget, whatever a lender allows.
Is DTI based on gross or net income?
Gross income, before taxes and deductions. The CFPB defines the ratio as all monthly debt payments divided by gross monthly income. Your take-home pay is smaller, so the same payments take a bigger share of what actually reaches your account.
Do utilities, phone bills and groceries count?
No. The debts that count are loan and credit payments and some legal obligations, like car loans, student loans, credit card minimum payments, leases and court-ordered child support or alimony. Everyday living costs are not on Fannie Mae's list of monthly debt obligations.
Is the 43 percent rule still in force?
Not as a federal cap. Under the CFPB's original qualified mortgage rule, a general QM loan could not have a DTI above 43 percent. The CFPB replaced that limit with a test based on the loan's price in a rule issued on December 10, 2020, with mandatory compliance from October 1, 2022. Lenders must still consider your DTI or residual income, and 43 percent remains FHA's standard total ratio for manual underwriting.
How do I lower my debt-to-income ratio?
Lower the payments or raise the income. Paying off a loan removes its payment entirely, which helps more than paying down a large balance a little. Avoid new credit before you apply, and if someone else will be on the loan, their income counts too. The calculator shows how many dollars of monthly payments you would need to cut to reach your target.