Purchase Tips · April 5, 2025
Debt-to-Income Ratio Explained: Calculate and Improve Yours
DTI is one of the top three factors in mortgage qualification. Here is how to calculate it, what programs require, and how to improve it before applying.
DTI = Total Monthly Debt Payments divided by Gross Monthly Income times 100.
What Counts as Monthly Debt
Proposed mortgage (PITI), car loans, student loan payments, credit card minimums, personal loans, and any installment debt. Gross income is before taxes and must be documented.
Program Limits
Conventional: up to 45-50% with compensating factors. FHA: up to 43% standard, 57% with strong compensating factors. VA: 41% guideline. USDA: 41% typical maximum.
How to Improve DTI Before Applying
Pay down revolving debt first — eliminating a credit card payment removes it from the calculation entirely. Pay off installment loans with fewer than 10 payments remaining — many lenders can exclude them. Avoid new debt before applying. Add a co-borrower with income and limited debt to dramatically improve combined DTI.
The Two DTI Numbers
Most programs use two ratios: front-end (housing costs only divided by income, guideline 28%) and back-end (all debt including housing divided by income, the primary focus).
HMS runs detailed DTI calculations during pre-approval and identifies the fastest path to qualification. Call 309-222-8286.