What is a good debt-to-income ratio for a mortgage?

Below 36% is considered good. Below 43% is acceptable for most loan programs. FHA allows up to 50% with compensating factors. The lower your DTI, the more loan options and better terms you can access.

Do student loans in deferment count against my DTI?

Usually yes. Most lenders count deferred student loans at 0.5% to 1% of the outstanding balance per month, even if payments are not currently required. Check the specific guidelines for your loan type.

Can I get a mortgage with a 50% DTI?

Possibly. FHA loans allow up to 50% DTI with compensating factors such as strong credit, significant reserves, or residual income. Conventional loans rarely go above 45 to 50%. Higher DTI means fewer program options.

Debt-to-Income Ratio: How Lenders Measure Your Ability to Repay

Debt-to-income ratio (DTI) is one of the most important numbers in mortgage qualification. It tells lenders how much of your monthly income is already committed to existing debt obligations, and how much room you have to take on a mortgage payment. Understanding how DTI is calculated and how to improve it can mean the difference between loan approval and denial. Coventry Enterprises LLC Loans explains DTI in full detail below.

How DTI Is Calculated

DTI is expressed as a percentage: your total monthly debt payments divided by your gross (pre-tax) monthly income.

Formula: DTI = Total Monthly Debt Payments / Gross Monthly Income

Example: You earn $6,500 per month gross. Your monthly debts are:

Proposed mortgage (PITI): $1,800
Car payment: $450
Student loan minimum payment: $200
Credit card minimums: $75
Total: $2,525

DTI = $2,525 / $6,500 = 38.8%

Front-End DTI vs. Back-End DTI

Lenders calculate two DTI ratios:

Front-end DTI (housing ratio): Only your proposed housing costs (PITI) divided by gross income. In the example above: $1,800 / $6,500 = 27.7%. Most conventional loans prefer front-end DTI below 28%.
Back-end DTI (total DTI): All monthly debt payments including housing, divided by gross income. This is the primary DTI lenders focus on. In the example: 38.8%.

DTI Limits by Loan Type

Loan Type	Typical Maximum Back-End DTI
Conventional (DU/LP automated approval)	45 to 50%
Conventional (manual underwriting)	36 to 45%
FHA	50% (with compensating factors)
VA	No hard limit; uses residual income test
USDA	41% (can exceed with compensating factors)
Jumbo (non-conforming)	43 to 45% typically

VA Residual Income: A Different Standard

VA loans use residual income as a secondary qualification test. Residual income is the amount of money left over each month after all major expenses (housing, debt payments, taxes) are paid. VA sets minimum residual income thresholds based on family size and geographic region. A high DTI may be acceptable if residual income is strong enough. This is one reason VA loans are considered borrower-friendly for moderate-income veterans with significant monthly obligations.

What Counts as Debt in DTI

Lenders include all monthly obligations that appear on your credit report, plus any new housing payment. Specifically:

Mortgage payments (proposed or existing)
Car loans and leases
Student loans (even if in deferment; lenders often use 0.5 to 1% of the balance as the monthly payment when deferred)
Credit card minimum payments
Personal loan payments
Child support and alimony obligations
Co-signed loans you are responsible for
Rental property mortgages (net of rental income)

What Does NOT Count as Debt

Utilities (electric, water, gas, phone)
Groceries, clothing, transportation costs
Insurance premiums (life, health, auto)
Subscriptions and memberships
Childcare costs (generally; some programs may consider them)
Voluntary retirement contributions

Strategies to Lower Your DTI

Pay Off or Pay Down Debts

The most direct strategy. Paying off a car loan eliminates that monthly payment entirely from your DTI. Paying off credit cards brings minimum payments to zero. Even paying down a balance significantly enough to eliminate a minimum payment can help.

Avoid New Debt Before Applying

Every new loan or credit obligation increases your DTI. Do not finance furniture, appliances, or a car in the months before applying for a mortgage. Even a $300 car payment can make a meaningful difference in qualifying.

Increase Your Income

DTI is a ratio. Increasing the denominator (income) reduces the ratio even without changing debt. If you have a raise, bonus, or part-time income that has been consistent for two or more years, lenders may be able to count it. A second job can qualify if you have been at it for at least 12 to 24 months depending on the program.

Choose a Loan Type with Higher DTI Tolerance

If your DTI is 47%, a conventional loan with a 45% cap may not work, but FHA might. Alternatively, automated underwriting systems (Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector) sometimes approve higher DTIs than manual guidelines suggest, particularly for borrowers with strong compensating factors like high credit scores or significant reserves.

How DTI Affects Your Rate

DTI does not directly change your interest rate the way credit score does, but it does affect whether you can access certain loan programs and whether you need mortgage insurance. Higher DTI with lower credit score combinations trigger pricing adjustments (called loan-level price adjustments or LLPAs) that raise the effective rate. Coventry Enterprises LLC Loans encourages borrowers to review their DTI before applying so they can take steps to improve it if needed.