Understanding Debt-to-Income (DTI): The Number That Decides Your Mortgage
DTI — debt-to-income — is the number that decides how much house you can buy. Two borrowers with identical income and credit can qualify for wildly different loan amounts based on DTI alone.
Front-end vs. back-end DTI
Front-end DTI = housing payment (PITI) ÷ gross monthly income. Most programs prefer this under 28–31%.
Back-end DTI = (housing payment + all other debt payments) ÷ gross monthly income. Most programs cap this at 43%, with exceptions to 50% with strong compensating factors.
What counts as "debt"
Minimum payments on credit cards, car loans, student loans, personal loans, child support, alimony, and any other recurring obligation on your credit report. Utilities, groceries, gas, insurance, and subscriptions do NOT count.
How to improve your DTI
Pay off the highest-payment loans first (not the highest-interest — the goal is to remove monthly obligations). A $400/month car loan with $2,000 left on it might be the single best dollar you can spend before applying.
Increase qualifying income with documented overtime, bonus history, or a second job (requires a two-year history to count).
Refinance student loans into income-driven plans with lower required monthly payments.
Frequently asked questions
What's a good DTI?
Under 36% is excellent. 36–43% is acceptable. 43–50% requires compensating factors. Above 50% typically won't qualify for conventional financing.
Does my spouse's debt count if they're not on the loan?
In community-property states, sometimes yes. Talk to a Bloomfield Lending expert about your specific situation.