As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28%–35% of that debt going toward servicing a mortgage.
Key takeaways. Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
The LTV ratio is less than or equal to 90 percent for manually under- written mortgages (105 percent CLTV for mortgages with Affordable Seconds®.). The debt-to-income (DTI) ratio is less than or equal to 43 percent based on the occupying borrower's income for manually underwrit- ten mortgages.
Maximum debt-to-income ratio
For manually underwritten loans, the maximum DTI ratio is 36%. That limit increases to 45% if the borrower meets additional credit score and reserve requirements.
Standards and guidelines vary, most lenders like to see a DTI below 35─36% but some mortgage lenders allow up to 43─45% DTI, with some FHA-insured loans allowing a 50% DTI.
Mortgage lenders want to see a debt-to-income (DTI) ratio of 43% or less. Anything above that could lead to the rejection of your application. The closer your DTI ratio is to that percentage, the less favorable your mortgage terms are likely to be. A Home Purchase Worksheet can help you determine your DTI ratio.
FHA loans for higher DTI
FHA loans are known for being more lenient with credit and DTI requirements. With a good credit score (580 or higher), you might qualify for an FHA loan with a DTI ratio of up to 50%. This makes FHA loans a popular choice for borrowers with good credit but high debt-to-income ratios.
The maximum DTI ratio allowed for an FHA loan varies by lender and is typically between 43% to 50%. At Better Mortgage, there are circumstances where up to 57% is allowed.
First is the front-end DTI ratio, which measures how much of your gross monthly income will be used on your monthly mortgage payment, including property taxes, mortgage insurance and homeowners insurance.
Dentists' debt-to-income ratios worse than other health workers. Though school debt consistently exceeded income for healthcare occupations -- except for physicians -- between 2017 and 2022, dentists had the highest debt-to-income ratios. The study was published in the American Journal of Pharmaceutical Education.
Conventional loans are most often but not always conforming loans, and they're considered the most common mortgage option. The minimum down payment for a conventional mortgage loan is 3% of the purchase price if you're a first-time home buyer, and it's 5% for repeat buyers.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
Lenders generally prefer to see a DTI ratio of 43% or less. However, some may consider higher ratios, up to 55% on a case-by-case basis - more about DTI limits later.
Debt-to-income ratio of 42% to 49%
DTIs between 42% and 49% suggest you're nearing unmanageable levels of debt relative to your income. Lenders might not be convinced that you will be able to meet payments for another line of credit.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
In summary, here's what we found: You need to make at least $54,000 per year to afford a $200,000 house. You need to make at least $81,000 per year to afford a $300,000 house. You need to make at least $109,000 per year to afford a $400,000 house.
According to the Federal Deposit Insurance Corp., lenders typically want the front-end ratio to be no more than 25% to 28% of your monthly gross income. The back-end ratio includes housing expenses plus long-term debt. Lenders prefer to see this number at 33% to 36% of your monthly gross income.
800 to 850: Excellent Credit Score
Individuals in this range are considered to be low-risk borrowers.
Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.
Your debt-to-income ratio does not factor in your monthly rent payments, any medical debt that you might owe, your cable bill, your cell phone bill, utilities, car insurance or health insurance.
Can you get a mortgage with student loans? It's not uncommon for a first-time home buyer to have anywhere from $30,000 to $100,000 in student loan debt and still qualify for a mortgage, Park says.
Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it's the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt.