What's a good debt-to-income ratio?

Debt-to-income (DTI) is the share of your gross monthly income that goes to debt payments. Mortgage lenders use it to judge whether you can carry a new payment, and it is the number most likely to decide how large a loan you are offered. A "good" ratio depends on who is reading it. Each loan program publishes guidelines, and none of them is a hard ceiling.

What counts, and what does not

The ratio counts debts: the proposed housing payment (principal, interest, property tax, homeowners insurance, HOA dues and any mortgage insurance), car loans, student loans, minimum credit card payments, personal loans, child support or alimony, and other recurring obligations on your credit report.

It leaves out the costs of living, even large ones: utilities, phone, groceries, and insurance other than the housing payment's, such as health or car insurance. USDA's rule spells out more that stays out of its total ratio: "Contributions to personal income taxes, retirement accounts (including the repayment of personal loans from those retirement accounts), savings (including repayment of loans secured by such funds), the cost to commute, membership fees in unions or like organizations, childcare or other voluntary obligations will not be considered in the TD ratio."

That is why a ratio a lender accepts can still be a tight budget. The ratio measures debts against gross income, not what is left of your take-home pay.

Front-end and back-end

The front-end ratio is the housing payment alone over gross income. The back-end ratio is the housing payment plus every other debt over the same income. At $8,000 a month of income, a $2,000 housing payment is a 25% front-end ratio; add $800 of other debts and the back-end ratio is 35%.

The back-end ratio is the one every program uses. Only FHA and USDA set a front-end figure too.

The program guidelines

Conventional (Fannie Mae). The Selling Guide (7 October 2026): "For manually underwritten loans, Fannie Mae's maximum total DTI ratio is 36% of the borrower's stable monthly income." It can go to 45% with the credit score and reserves in Fannie Mae's Eligibility Matrix, and "For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%." There is no housing ratio.

FHA. Handbook 4000.1 (12 August 2026) sets ratios for manually underwritten loans, as housing over total: 31/43 with no compensating factors; 37/47 with one, such as verified cash reserves; 40/40 with no discretionary debt; and 40/50 with two. The higher tiers need a credit score of 580 or above. "Energy Efficient Homes may have stretch ratios of 33/45."

VA. 38 CFR 36.4340: "The standard is 41 percent or less." VA rounds the ratio to a whole percent and reads it together with residual income, below.

USDA. 7 CFR 3555.151 allows housing costs that do "not exceed 29 percent of the applicant's repayment income" and total debt that "does not exceed 41 percent of the applicant's repayment income."

The debt-to-income calculator puts your ratios beside all four, with student loans counted each program's way.

Why automated underwriting can go higher

Most loans are not underwritten by hand. Fannie Mae's Desktop Underwriter, FHA's TOTAL Scorecard and the systems VA and USDA lenders use weigh the ratio together with credit history, reserves, down payment and the rest of the file. A strong file can be approved above the manual figures: Fannie Mae's automated maximum is 50%, FHA's handbook sets no fixed ratio for TOTAL approvals, and USDA's rule lets an approved automated system accept a ratio exception. A weak file can be declined below them, and a lender can apply stricter limits of its own.

Student loans

Student loans are counted differently by each program, especially when the payment is $0.

• Fannie Mae: "If the borrower is on an income-driven payment plan, the lender may obtain student loan documentation to verify the actual monthly payment is $0." For a loan in deferment or forbearance, the lender may use 1% of the balance a month, or a fully amortizing payment from the loan's terms.
• FHA: the payment on the credit report when it is above zero, or "0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower's credit report is zero", whatever the loan's status.
• VA: nothing if the loan "will be deferred at least 12 months beyond the date of closing"; otherwise 5% of the balance a year, divided by 12, unless the credit report shows more or the servicer documents less. On $25,000 that is $104.17 a month.
• USDA: its handbook sets the rule; ask your lender how it applies to you.

On a $30,000 loan in an income-driven plan with a $0 payment, that is $0 for Fannie Mae, $150 for FHA and $125 for VA without a servicer statement: nearly two points of ratio on $8,000 a month of income.

VA residual income

VA adds a second test. Residual income is what is left of gross income after federal and state income tax, Social Security and Medicare, retirement contributions, the housing payment, maintenance and utilities, debts, and job costs such as child care. For maintenance and utilities, VA Pamphlet 26-7 says to "Calculate maintenance and utility costs using 14¢ per square foot for the gross living area as per the appraisal."

The result is compared with a table by region, family size and loan amount. For a loan of $80,000 or more, a family of four needs $1,003 a month in the South and Midwest, $1,025 in the Northeast and $1,117 in the West. Above a 41% ratio, residual income matters more: "If the ratio is greater than 41 percent and the residual income exceeds the guidelines by at least 20 percent, the second level review and statement of justification are not required."

43% is no longer the legal test

You will often read that 43% is the limit. It came from the original Qualified Mortgage rule, and the CFPB's General QM Final Rule removed it, replacing the DTI limit with price-based thresholds: whether a loan's APR exceeds the average prime offer rate by a set margin. Lenders must still consider DTI or residual income, but no single ratio is now the legal line. The program guidelines above are what lenders actually work to.

Ways to lower your ratio

• Pay off a small debt. Clearing a $300 car payment lowers the ratio more than paying the same money off a large balance whose payment barely moves.
• Document all your income. A co-borrower's income, or income you have but have not documented, raises the denominator.
• Check your student loan payment. An income-driven payment that is lower than the program's formula may count, with the right paperwork.
• Choose a smaller payment. A lower price, a larger down payment or a lower rate all shrink the housing payment.
• Avoid new debt before closing. A new car loan between approval and closing can undo an approval.

A ratio inside the guidelines tells you a lender may approve the loan. Whether the payment fits your life is a separate question, which the guide to how much house you can afford takes up.

Sources: Fannie Mae, Selling Guide B3-6-02 and B3-6-05 (7 October 2026). HUD Handbook 4000.1 (12 August 2026). 38 CFR 36.4340 and VA Pamphlet 26-7, Chapter 4. 7 CFR 3555.151. CFPB, General QM Final Rule.