As you may have guessed, lenders like DTI to be low. For conventional loans, max DTI has recently increased since July 2017 from 45% to 50%. FHA loans may be stretched up to 55%.
Here is how the DTI is compute:
Add up all of borrowers monthly debt obligations (recurring debts)
- Mortgages (principal, interest, taxes and home insurance)
- home equity loan payments HELOC
- Car loans
- Student loans
- Minimum monthly credit card payments
- Other loan payments
Do not include anything like utilites, phones, dining, traveling, grocery shopping, or other cash expenses.
Add up all sources of income
- Consulting work – 1099
- Social Security Benefits
- Dividends and or royalty
- Other document-able incomes
Now divide the total debt by total income. This should be your DTI.