The Debt-to-Income Ratio, also known as “DTI Ratio”, are simply a couple of percentage representing applicant debt compared to their total income. Lenders use mortgage debt-to-income ratio percentages to evaluate a borrowers ability to repay them as agreed. Maximum debt-to-income ratios may vary based upon the mortgage program and the lender.

How to Determine Debt to Income Ratio Percentages

There are two debt-to-income ratios utilized for most mortgage programs.  The first ratio is known as your top ratio, and that uses your new housing payment as a percentage of your gross monthly income. The second ratio, known as your ‘bottom ratio’, factors all your monthly debt, including new housing expenses, as a percentage of your monthly income.

Learn More About Debt to Income Ratios

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Conventional Loan Debt to Income Ratio

DTI Ratio

Conventional loan DTI ratios are somewhat flexible, particularly if an automated underwriting system (AUS) is used. Preferred conventional debt to income ratios are:

  • 28% Top Ratio
  • 36% Bottom Ratio

These ratios may be exceeded depending on borrower qualifications and AUS. The maximum conventional loan debt-to-income ratio is 50% if an applicant meets meets program credit score and reserve requirements.

Residence Usage, LTV, ReservesLess than 36% DTI36% to 50% DTI
Primary more than 75% LTV, no reservesMin Score 680Min Score 700
Primary less than 75% LTV, no reservesMin Score 620Min Score 640
Primary more than 75% LTV, 6 mo reservesMin Score 660Min Score 680
Primary less than 75% LTV, 6 mo reserves75% LTV65% LTV
1 Unit Second Home90% LTV80% LTV
1 Unit Investment85% LTV75% LTV
2 Units Investment75% LTV65% LTV
3 Units Investment75% LTV65% LTV
4 Units Investment75% LTV65% LTV

FHA Debt to Income Ratio

DTI for 3% down payment FHA loans and FHA mortgage insurance may include a degree of flexibility if an Automated Underwriting System is used. Baseline FHA debt to income ratio limits are:

  • 31% Top Ratio
  • 43% Bottom Ratio

If an applicant has very good compensating factors, some lenders will allow anything the AUS allows, which has occasionally permitted FHA max DTI to climb as high as 58% or 59% for very qualified borrowers.

USDA Debt to Income Ratio

Maximum USDA DTI limits work similarly FHA loans.  What’s different about USDA loan income requirements is there is also a maximum income that a borrower can make.  That maximum limit varies based upon area and is connected to area median income. Baseline USDA loan debt-to-income ratio limits are:

  • 29% Top Ratio
  • 41% Bottom Ratio

Like other programs, these baseline debt to income ratio for USDA loan programs can be exceeded with a ‘Guaranteed Underwriting System’  approval, which is the USDA version of the AUS.

VA Debt to Income Ratio

VA Loans evaluate borrower income differently than other popular mortgage counterparts.  To meet VA debt to income requirements, qualified veterans or their spouses can have bottom ratios as high as 50% or greater if they’re approved through an automated underwriting system. VA loans also employ a ‘Residual Income’ approach to evaluate veteran income.  VA residual income guidelines

  • VA Residual Income Requirements
  • 41% Bottom Ratio

How to Calculate Debt-to-Income Ratio

Top Ratio

  • Add together all of your gross income (annual) for the last two years and divide it by 24, as reported on your tax returns.
  • Add together all of your proposed monthly housing expenses, including principal, interest, taxes, insurance, mortgage insurance, and HOA dues.
  • Divide that your monthly expenses by your average monthly income.

Bottom Ratio

  1. Add together all of your gross income (annual) for the last two years and divide it by 24, as reported on your tax returns.
  2. Add together all your monthly liabilities, particularly the ones that appear on your credit report.
  3. Divide that your monthly liabilities by your average monthly income.

As you can see, Calculating your debt-to-income ratio is an pretty simple thing to do.  Your credit report shows what your monthly payments are, which makes them easy to figure. If you’re asking yourself ‘what is my debt to income ratio’ right now, look no further than a debt-to-income calculator.

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