Debt-to-Income Ratio (DTI)
Debt-to-Income Ratio (DTI), sometimes called the debt ratio or total debt ratio, measures how much of your gross monthly income goes toward your monthly debt obligations. Mortgage lenders use your DTI to help determine whether you can comfortably afford a new mortgage payment.
There are two types of DTI:
- Front-end DTI includes housing expenses only, such as the proposed mortgage payment (principal, interest, property taxes, homeowners insurance, and, if applicable, homeowners association dues).
- Back-end DTI includes your housing expenses plus other recurring monthly debts, such as car loans, student loans, credit cards, personal loans, and other required monthly payments.
Maximum allowable DTI varies by loan program and borrower qualifications. Conventional loans often allow DTIs up to 50%, while FHA loans may allow 55% or higher when supported by automated underwriting and other compensating factors.