Debt-to-Income Ratio Explained: How Lenders Decide What You Can Borrow
Updated November 8, 2026
Your income alone does not determine how much a lender will approve. What matters is how much of that income is already spoken for. That measure is your debt-to-income ratio, or DTI.
The two ratios
Front-end ratio is your housing payment divided by your gross monthly income. The housing payment includes principal, interest, taxes, insurance, and any PMI and HOA dues.
Back-end ratio is your housing payment plus all other monthly debt payments, divided by the same income. When people say "DTI", they usually mean this one.
A worked example
Imagine someone earns $90,000 a year, or $7,500 a month before taxes. They have a $350 car payment and $150 of student loan payments, for $500 of debt.
- At a 28% front-end limit, the housing payment can be up to $2,100.
- At a 36% back-end limit, total debts can be up to $2,700, which leaves $2,200 for housing after the $500 of debts.
- At a 43% back-end limit, total debts can be up to $3,225, which leaves $2,725 for housing.
Lenders generally apply whichever limit is tighter for the program. In this example at 28/36, the $2,100 front-end limit would apply.
What counts as debt
Usually counted: car loans, student loans, credit card minimum payments, personal loans, child support and alimony.
Usually not counted: utilities, groceries, phone bills, subscriptions and regular insurance premiums outside the mortgage. These do not appear in your DTI, but they still have to fit in your budget.
Common limits
The traditional guideline is 28% front-end and 36% back-end. Many conventional, FHA and VA programs can go higher for applicants with strong credit, savings or other compensating factors. Exact limits depend on the program and the lender, so ask for the current rules when you apply.
How to improve your DTI quickly
- Pay off a small loan completely. Removing a whole monthly payment helps more than partly paying down a large balance.
- Reduce credit card balances, since a lower balance often lowers the minimum payment.
- Avoid new debt before applying, including financing a car or furniture.
- Document all income, such as bonuses, overtime and side income, if you have the history that lenders require.
- Consider a co-borrower, whose income and debts would both count.
Approved does not mean comfortable
DTI uses income before taxes and ignores most of your living costs. Someone at 43% DTI with childcare expenses may have very little left each month. It is worth checking any proposed payment against your take-home pay and keeping room for savings and home repairs.
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This article is general information, not financial, tax, legal or insurance advice. Figures are illustrative examples.