Debt-to-income ratio limits by loan type — and how to lower yours

Debt-to-income is the ratio that kills more mortgage applications than credit score. It is also the one you can change fastest.

The limits by program

Program	Typical maximum back-end DTI	Notes
Conventional (Fannie/Freddie)	45%; up to 50% with automated approval	Strong credit and reserves needed above 45%
FHA	43% manual; up to about 57% with automated approval	Compensating factors required at the high end
VA	41% guideline	Residual income test matters more; higher DTI common
USDA	41% (29% front-end)	Waivers possible with GUS approval and compensating factors
Jumbo	Often 43%, lender-specific	Portfolio lenders set their own rules

What counts as debt

Anything with a required monthly payment on your credit report or in your documents: installment loans, minimum credit card payments (the statement minimum, not your balance), student loans (see below), leases, alimony and child support, co-signed loans (unless you prove the other party has paid for 12 months), and the full proposed housing payment including taxes, insurance, mortgage insurance and HOA dues. Debts with fewer than 10 months remaining can often be excluded on conventional loans if the payment is small relative to income.

What does not count

Utilities, phone and streaming bills, insurance premiums other than the home’s, 401(k) loans, and medical collections. Business debts paid by a business with 12 months of proof may be excluded for the self-employed.

Student loans — the special case

Conventional: the payment on the credit report, or 1% of the balance if it shows $0, or the documented payment under an income-driven plan. FHA: the payment on the report, or 0.5% of the balance if $0 or deferred. VA: payments deferred more than 12 months past closing may be excluded; otherwise 5% of the balance divided by 12 unless the actual payment is documented higher.

Six ways to lower your DTI

Pay off an installment loan with fewer than 10 months left — its entire payment disappears.
Pay down a credit card so its minimum drops (minimums are usually 1% to 3% of the balance).
Document an income-driven student loan payment instead of letting the lender impute 1%.
Add a co-borrower with income and little debt.
Choose a lower-priced home or a larger down payment so the housing payment shrinks.
Document all qualifying income: a second job with a two-year history, documented bonuses, rental income from a unit you will occupy.

Frequently asked questions

Is DTI calculated on gross or net income?

Gross (before taxes and deductions). That is why a 43% DTI feels much heavier on your actual paycheck.

Can I pay off debt at closing to qualify?

Sometimes — conventional guidelines allow paying off revolving debt at or before closing to exclude it, with the funds documented. Installment loans must usually be paid in full, not partially.

Does my spouse’s debt count if they are not on the loan?

In most states, no. In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), FHA, VA and USDA loans count the non-borrowing spouse’s debts; conventional loans do not.