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How to Calculate Your Debt-to-Income Ratio for a Mortgage

Lenders use your DTI ratio to determine how much of a loan you qualify for.

This article shows you how to calculate your DTI ratio and provides tips on how you can lower it to increase the loan amount you can get.

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What is the Debt-To-Income Ratio?

Your debt-to-income ratio (DTI ratio) is the amount of your income that goes towards your monthly debt obligations. There are two types of DTI ratios lenders look at when determining the loan amount a borrower qualifies for. The back-end and front-end debt-to-income ratio. 

  • Front-end DTI Ratio – The front-end ratio is your debt-to-income ratio looking at just the monthly housing expenses. The principal and interest payments, property taxes, mortgage insurance, and homeowners insurance.
  • Back-end DTI Ratio – Your back-end debt-to-income ratio factors in total monthly debt obligations such as auto loans, credit card payments, and housing costs.


How to Calculate your DTI Ratio?

“total monthly debt payments” divided by “monthly income” = debt-to-income ratio

1. Take your annual income and divide it by 12 to get your monthly income.

2. Add up your reoccurring monthly expenses such as:

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  • Minimum monthly payments on credit cards
  • Auto loans
  • Student loans
  • Personal loans


Note: To find your back-end DTI ratio add your monthly mortgage payment

3. Divide your monthly debt obligations by your monthly income to get your DTI ratio


For example: If your yearly income is $60,000 and your total monthly debt payments come to $1,000

$60,000 divided by 12 = $5,000

$1,000 divided by $5,000 = .2

= 20% debt-to-income ratio

Debt-to-Income Ratio Needed for a Mortgage

The maximum debt-to-income ratio lenders require depends on the type of mortgage loan you’re applying for. For a conventional loan, the maximum DTI ratio is 43%. Government home loans such as FHA and USDA loans allow for DTI ratios as high as 50%.

Maximum DTI Ratio by Loan Type

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  • Conventional loans – 43%
  • FHA loans – 50%
  • VA loans – 50%
  • USDA loans 50%
  • 203k loans – 45%


How to Reduce Your Debt-to-Income Ratio

If your DTI ratio is too high to get approved for the loan amount you’re looking for, you need to take some steps to lower it. Such as choosing a longer loan term that will lower your monthly payment by stretching out your payments over a longer timeframe.

Ways to Lower Your Debt-to-Income Ratio

  • Get a 40-year fixed-rate mortgage
  • Get a second job
  • Refinance your loans
  • Pay off credit card debt

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