What each programme allows
| Programme | Back-end limit | You | Notes |
|---|
Getting to a target
VA looks at what is left over instead
Debt-to-income is the share of your gross monthly income that goes out on debt payments. It is the number that decides most mortgage applications, and it is worth knowing before a lender tells you.
The two ratios
- Front-end: housing costs only, which means mortgage payment, property tax, home insurance and any HOA dues.
- Back-end: housing plus every other required monthly payment: card minimums, car loans, student loans, personal loans, child support.
Both use gross income, before tax. Things like groceries, utilities and phone bills are not counted, which is why a ratio that passes can still feel tight in practice.
The 43% rule is out of date
For years the answer was “stay under 43%”, because that was the cap in the Qualified Mortgage rule. The CFPB removed it. The 2020 final rule replaced the 43% DTI limit with price-based thresholds, and mandatory compliance began on 1 October 2022. A loan now qualifies based on how its APR compares with the average prime offer rate, not on a single DTI number.
Lenders still care about DTI, because their own rules and the automated underwriting systems do. But if you read that 43% is a legal maximum, that has not been true since 2022.
What lenders actually use
| Programme | In practice |
|---|---|
| Fannie Mae, manual underwriting | 36%, or up to 45% with a strong credit score and reserves |
| Fannie Mae, Desktop Underwriter | Up to 50% |
| FHA | 31% housing and 43% total as the standard, higher with compensating factors |
| VA | 41% as a guideline, with residual income doing the real work |
How debts are counted
- Credit cards: the minimum payment on the statement. If none is shown, Fannie Mae uses 5% of the balance.
- Student loans: the actual payment, including a documented $0 income-driven payment. If it cannot be determined, 1% of the balance is used.
- Car loans and instalment debt: the payment. Loans with ten or fewer payments left can often be left out.
- Leases: always counted, however few payments remain, because they get renewed.
The VA approach: residual income
VA runs a different test. After the mortgage, the debts and income tax, a set amount has to be left over each month, which varies by family size and region: for a family of four in the South the guideline is $1,003. VA will also go above 41% DTI without extra justification when residual income exceeds the guideline by at least 20%. The box above checks both.
Lowering the ratio
Paying off a small loan with a large monthly payment helps far more than paying down a large balance with a small one, because the ratio counts payments, not balances. Clearing a $290-a-month car loan does more than knocking $5,000 off a mortgage. The target box above works out exactly how much of a monthly payment you need to remove.
Quick answers
How do I calculate debt-to-income ratio?
Add up your required monthly debt payments, including the housing payment, and divide by gross monthly income. Multiply by 100 for the percentage.
What is a good debt-to-income ratio?
Below 36% is comfortable. Most conventional lenders will go to 45%, and to 50% through automated underwriting. Above 50% is outside almost every programme.
Is 43% DTI still the limit for a mortgage?
No. The CFPB replaced the 43% Qualified Mortgage cap with price-based thresholds, with mandatory compliance from October 2022. Lenders still use their own DTI limits.
What counts as debt in DTI?
Required monthly payments: card minimums, car and personal loans, student loans, child support and the housing payment. Utilities, groceries and insurance other than home insurance do not count.
How can I lower my DTI quickly?
Clear a debt with a large monthly payment rather than one with a large balance, since the ratio counts payments. Or increase documented income.
Sources
- CFPB, General QM final rule, which removed the 43% DTI limit; mandatory compliance from 1 October 2022
- 12 CFR § 1026.43, ability to repay and the price-based QM thresholds
- Fannie Mae Selling Guide B3-6-02, maximum DTI ratios; B3-6-05, which debts count
- 38 CFR § 36.4340, the VA residual income tables and the 41% guideline
- HUD Handbook 4000.1, FHA underwriting ratios