Debt-to-Income Ratio Calculator (DTI)

Debt-to-income (DTI) ratio up close

When you put in an mortgage application, lenders evaluate your debt-to-income (DTI) to help determine whether you can afford to take on another payment.

Your DTI ratio and credit history are the two most important financial health factors all lenders consider when determining if they will lend you money.

Your DTI compares how much you owe each month to how much you earn. The lower your debt-to-income ratio is the less risky you are to lenders. The same goes with your credit score, the higher it is the less risky you are to the lenders.

Maximum Debt-to-income ratios

Maximum DTI for VA Loans and FHA Loans

Maximum DTI for VA home loans and FHA Loans will follow the AUS (automated underwriting system) recommendation or Manual Underwriting requirements, as applicable. Usually the highest ratios are 43% - 50%.

Maximum DTI for Conventional Loans

Maximum DTI as is determined by AUS. Usually the highest ratios are 43% - 50%.

Maximum DTI for Jumbo Loans

Usually the max DTI for Jumbo Home Loans is going to be 43%.

Compensating factors

Strong compensating factors will also permit the applicants to often exceed ratios on VA FHA and Conventional loans.

Some factors include:

• Large Cash Reserves post-closing - good amount of saving in the bank.
• The borrower makes a large down payment.
• Exceptional credit history and high score.
• The borrower(s) has successfully demonstrated the ability to pay housing expenses equal to or greater than the new proposed monthly housing expense for the past 12-24 months.
• The borrower(s) has demonstrated an ability to accumulate savings comparable to the difference between current housing costs and projected costs.
• The use of retirement accounts as compensating factors and as cash reserves is limited to 60% of the vested amount of the retirement asset to offset potential withdrawals by the applicant(s). Retirement accounts that restrict withdrawals to circumstances involving the borrower’s employment separation, retirement or death should not be considered as a compensating factor or as cash reserves.
• The borrower(s) has demonstrated a conservative attitude toward the use of credit.
• Continuous employment with the current primary employer.
• The borrower has a potential for increased earnings, as indicated by job training or education in the borrower(s) profession.