Debt-to-income ratio: the limits mortgage lenders use

How DTI is calculated

The Consumer Financial Protection Bureau (CFPB) defines DTI as “all your monthly debt payments divided by your gross monthly income,” which is your earnings before taxes and other deductions. It is one way lenders measure your ability to manage the monthly payments to repay what you borrow.

Example. Take gross income of $7,500 a month and these payments:

DTI is $3,000 ÷ $7,500 = 40 percent. The mortgage alone is $2,100 ÷ $7,500 = 28 percent. Lenders can look at both numbers, often called the housing ratio and the total ratio.

What counts as a debt

Fannie Mae’s guide lists the obligations that make up the “total monthly obligations.” They include:

• The housing payment for your principal residence, using principal, interest, taxes, insurance and association dues, at the qualifying payment for the new loan.
• Installment and other mortgage debts that last more than ten months, and shorter ones if they significantly affect your ability to pay.
• Revolving debts such as credit cards.
• Lease payments, whatever the lease end date.
• Alimony, child support or maintenance lasting more than ten months.
• Payments on other properties you own, and any net loss from a rental property.
• Other recurring monthly obligations.

Income is the total monthly income of all borrowers, to the extent that income is used to qualify. Everyday costs such as groceries, utilities and phone plans are not part of the ratio.

The federal rule: lenders must check, but no fixed number

Regulation Z’s ability-to-repay rule says a lender must make a reasonable, good-faith determination that you can repay the loan. Among the factors it must consider is your monthly DTI or your monthly residual income, and it must verify the debts and income it relies on using reliable third-party records (12 CFR § 1026.43(c)).

The rule’s “qualified mortgage” definition (the loan types that get a legal presumption of compliance) requires the lender to consider DTI or residual income and verify it, but the regulation text does not set a percentage cap on DTI (§ 1026.43(e)(2)). The general qualified mortgage test instead has a price limit: the APR may not exceed the average prime offer rate by 2.25 percentage points or more for a first-lien loan at or above the indexed threshold amount (§ 1026.43(e)(2)(vi)). Dollar thresholds are adjusted each year; the figures are in the CFPB’s official commentary.

So the limit you face comes from the investor or program that will buy or insure the loan, plus the lender’s own overlays.

Fannie Mae’s limits (Selling Guide B3-6-02)

The guide, last revised 04/02/2025 and part of the Selling Guide published October 7, 2026, sets two tracks:

Fannie Mae says a manually underwritten loan whose DTI is recalculated above 45 percent is not eligible for delivery, and a DU loan above 50 percent is not eligible. The 50 percent figure is a maximum for delivery, not a promise of approval; a lender can set a lower limit.

Freddie Mac publishes its own DTI rules in its Single-Family Seller/Servicer Guide, and FHA, VA and USDA each have separate programs. Do not assume the Fannie Mae numbers apply to those. See FHA loans, VA loans, USDA loans and conventional loans.

How to lower your DTI

• Pay off or pay down installment loans and credit cards before you apply. Debts that end within ten months may be excluded.
• Raise the income lenders can count, with documentation.
• Choose a lower-priced home or a larger down payment so the new housing payment is smaller.
• Avoid new credit before closing; new debt changes the ratio that the lender re-checks.

Your credit score and your DTI are separate tests. See mortgage preapproval for what lenders check.

Where states differ

The ratio and the federal ability-to-repay rule are the same in every state. What changes is the tax and insurance part of your housing payment, which varies by location and can move the ratio. See Texas property tax for an example of a high-tax state, and first-time buyer programs in Texas or in California for state-run loan programs, whose rules are set by each state.