Debt to Income (DTI) Ratio Calculation

One of the factors that lenders look at when qualifying borrowers is debt to income ratio called DTI.  In short, DTI ratio is the amount of debts dividing by borrower’s incomes.

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

  • Paystubs
  • Consulting work – 1099
  • Alimony
  • Social Security Benefits
  • Dividends and or royalty
  • Other document-able incomes

Now divide the total debt by total income. This should be your DTI.

By Ivy Dinh

Experienced loan officer * Government loans: FHA and VA * Conventional loans * HARP 2 Refinance * Investment loans With many years of experience in the mortgage industry, I have broad knowledge of all current mortgage products and criterias that lenders looking for in each loan scenario. I love to apply my unique set of skills and knowledge to each file to make it becomes a successful transaction. Whether you are a borrower or a real estate professional who are looking for a mortgage, do not hesitate to contact me to learn about best loan products that fit your situation.