Debt-to-income ratio

Debt-to-income ratio, or DTI, compares counted monthly debt payments with gross monthly qualifying income. Divide monthly obligations by gross monthly income, then multiply by 100. Lenders use the percentage as one measure of repayment capacity. It is important, but it is not the only underwriting factor and there is no single maximum for every loan program or borrower.

Total DTI equals the proposed qualifying housing payment plus other counted monthly obligations, divided by gross monthly qualifying income. For example, $2,400 of housing expense plus $600 of other debt equals $3,000. Divide $3,000 by $8,000 of gross monthly income to get 0.375, or 37.5 percent.

The front-end ratio, often called the housing expense ratio, divides the proposed monthly housing expense by gross monthly qualifying income. Housing expense commonly includes principal, interest, property taxes, homeowners insurance, mortgage insurance when applicable, association dues, and other required housing charges under the selected program. It does not add the borrower's other recurring debts.

The back-end or total DTI ratio adds counted monthly debts to the qualifying housing payment, then divides the total by gross monthly qualifying income. Depending on program rules, counted obligations can include auto loans, revolving debt, student loans, leases, support obligations, and other mortgages. It is usually the broader capacity ratio tested on exam questions.

Standard mortgage DTI uses gross qualifying income, meaning eligible income before taxes and other deductions. Do not automatically use the gross number on a pay stub. The underwriter must decide what income is documented, stable, permitted, and reasonably expected to continue under the applicable program. Net income and residual income are different measures.

The exact answer depends on the program. Common counted items include the proposed housing payment, installment debts, revolving accounts, leases, student-loan obligations, alimony or child support when required, payments on other real estate, and known simultaneous loans. Utilities, groceries, and ordinary lifestyle spending usually are not scheduled debts in the ratio, although they still affect real affordability.

No. The CFPB removed the former 43 percent DTI ceiling from the General Qualified Mortgage definition and replaced it with price-based thresholds. Creditors still must evaluate repayment ability, and investors and loan programs retain their own DTI rules. Treat 43 percent as a historical or program-context number, not a universal federal approval line.

Fannie Mae's current guide states a 36 percent maximum for manually underwritten loans, with an increase up to 45 percent when the borrower satisfies required credit-score and reserve conditions. For casefiles underwritten through Desktop Underwriter, the stated maximum allowable DTI is 50 percent. Those are Fannie Mae eligibility rules, not promises that every lender or borrower will qualify at the maximum.

Potentially. Approval depends on the selected program, automated or manual findings, verified income, credit profile, reserves, down payment, property, compensating factors, and lender overlays. A permissible maximum is only an outer eligibility boundary. It does not require a creditor to approve the loan or prove that the payment fits the borrower's personal budget.

Yes. New credit, reduced income, a rate change, higher property taxes, revised insurance, association dues, appraisal issues, or a different loan amount can change DTI. Fannie Mae's guide requires re-underwriting when newly discovered debt or reduced income increases the ratio beyond its permitted tolerances. Buyers should avoid taking on new obligations before funding.

No. The questions are original. Primary sources were checked through August 1, 2026, including the current PSI Illinois outline, CFPB Regulations Z, Fannie Mae's DTI guide, its income chapter updated March 4, 2026, and HUD Handbook 4000.1 dated November 26, 2025. This is exam education, not underwriting, budgeting, legal, tax, or loan advice.