Direct answer: DTI = required monthly debt payments ÷ gross
monthly income. Lenders check two versions: front-end (housing
costs only; guideline ≤28%) and back-end (housing + all other
debt payments; guideline ≤36%, approvals often up to ~45–50%). Example: $8,000
gross income, $2,200 housing, $700 other debts → 27.5% front, 36.3%
back — right at the classic line.
What counts (and what doesn't)
- Counts: the full future housing payment (P&I + taxes + insurance + PMI + HOA), car loans/leases, student loans (IDR payment or a % of balance per program rules), personal loans, credit-card minimums, child support/alimony.
- Doesn't: utilities, phone, groceries, insurance (non-home), subscriptions, taxes — which is exactly why maxing your approved DTI can still wreck a real budget: the lender ignores half your life.
- Income side: gross (pre-tax) W-2 pay counts cleanly; variable/self-employment income typically needs a two-year average.
The real limits by program
Classic guidance is 28/36 — that's what our affordability calculator defaults to, with the aggressive row showing approval territory. In practice: conventional automated approvals reach ~45–50% back-end with strong compensating factors; FHA frequently approves to ~50%+; VA uses residual-income analysis alongside DTI. Approval ≠ comfort: at 45% back-end, nearly half of gross pay is spoken for before taxes, food, or savings.
Fixing a too-high DTI, ranked by speed
- Kill a monthly payment, not a balance. DTI counts payments — clearing a $430/month car loan frees ~$64,000 of mortgage capacity at current rates, often the single fastest lever (loan payoff calculator).
- Pay cards below their minimum-trigger balances — minimums shrink as balances do, and small minimums barely dent DTI.
- Recast/refinance an existing loan to lower its required payment (mind total cost — the trade-offs).
- Document more income: a second year of side-gig history, a co-borrower, or bonuses your lender can count.
- Lower the target payment: more down, cheaper house, or buying down the rate — the mortgage calculator shows each path's effect on the housing number.
The ratio to live by vs. the ratio to qualify by
Use ~36% back-end as your own ceiling and treat anything above as borrowed lifestyle. Lenders will happily approve more — their risk model only needs you to probably not default; your budget deserves a higher bar.