What we verified in “Debt-to-income ratio (DTI): what it is and how to lower it”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to the CFPB, your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income, which is generally what you earn before taxes and other deductions are taken out; it is one way lenders measure your ability to manage the monthly payments on the money you plan to borrow, and different loan products and lenders have different DTI limits.

   Sources 1 · What is a debt-to-income ratio? (last reviewed August 28, 2023): 'all your monthly debt payments divided by your gross monthly income'; 'the amount of money you have earned before your taxes and other deductions are taken out'; 'one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow'; 'Different loan products and lenders will have different DTI limits.' · Checked October 17, 2026

2. In the CFPB's example, someone who pays $1500 a month for a mortgage, $100 for an auto loan and $400 for other debts has monthly debt payments of $2,000; with a gross monthly income of $6,000, their DTI is 33%.

   Sources 1 · How do I calculate my debt-to-income ratio?: 'if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2,000'; 'If your gross monthly income is $6,000, then your debt-to-income ratio is 33 percent.' · Checked October 17, 2026

3. Under federal regulation (Regulation Z), for loans the rule covers, a creditor may not make the loan without making a reasonable and good faith determination, at or before consummation, that the consumer will be able to repay it; to do so it must consider, among other factors, the consumer's income or assets, the monthly payment on the loan, current debt obligations, alimony and child support, the monthly debt-to-income ratio or residual income, and credit history; residual income is what remains after subtracting total monthly debt obligations from total monthly income.

   Sources 2 · 12 CFR §1026.43(c)(1): 'reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan'; (c)(2)(vi)–(viii): 'current debt obligations, alimony, and child support'; 'monthly debt-to-income ratio or residual income'; 'credit history'; (c)(7)(ii)(B): 'remaining income after subtracting the consumer's total monthly debt obligations from the consumer's total monthly income' · Checked October 17, 2026

4. According to Fannie Mae's guide, the DTI ratio has two components: total monthly obligations, which include the qualifying payment for the new mortgage and other long-term and significant short-term monthly debts, and the total monthly income of all borrowers, to the extent it is used to qualify; obligations include the housing payment for each borrower's principal residence: if the new home will be the principal residence, its payment is used, and if a borrower will not live there, that borrower's mortgage or rent payment is used.

   Sources 3 · B3-6-02, Debt-to-Income Ratios (04/02/2025), 'DTI Ratios': 'the qualifying payment for the subject mortgage loan and other long-term and significant short-term monthly debts'; 'total monthly income of all borrowers, to the extent the income is used to qualify'; 'Calculating Total Monthly Obligation': 'the housing payment for each borrower's principal residence'; 'if the subject loan is the borrower's principal residence, use the PITIA'; 'if there is a non-occupant borrower, use the mortgage payment … or rental payments' · Checked October 17, 2026

5. Fannie Mae's total monthly obligation adds up, among others: payments on installment debts that extend beyond ten months (and those of ten months or less if they significantly affect the ability to meet credit obligations), payments on revolving debts, lease payments regardless of when the lease expires, alimony, child support or maintenance payments that extend beyond ten months, other recurring monthly obligations and any net loss from a rental property.

   Sources 3 · B3-6-02, 'Calculating Total Monthly Obligation': 'monthly payments on installment debts and other mortgage debts that extend beyond ten months'; 'if the payments significantly affect the borrower's ability to meet credit obligations'; 'monthly payments on revolving debts'; 'monthly payments on lease agreements, regardless of the expiration date of the lease'; 'monthly alimony, child support, or maintenance payments that extend beyond ten months'; 'monthly payments for other recurring monthly obligations'; 'any net loss from a rental property' · Checked October 17, 2026

6. According to Fannie Mae, installment debt not secured by a financial asset (student, auto and personal loans and timeshares) counts when more than ten payments remain; credit cards, department store cards and personal lines of credit count as long-term debts, and if the credit report shows no minimum payment and there is no other documentation, 5% of the balance is used; lease payments count regardless of the months remaining; voluntary support payments do not need to be counted; open 30-day charge accounts, paid in full every month, are not required to be included; and for deferred student loans or loans in forbearance, the lender may use 1% of the balance or a fully amortizing payment under the loan's terms.

   Sources 4 · B3-6-05, Monthly Debt Obligations (08/05/2026): 'Installment Debt': 'including student loans, automobile loans, personal loans, and timeshares'; 'if there are more than ten monthly payments remaining'; 'Revolving Charge/Lines of Credit': 'credit cards, department store charge cards, and personal lines of credit'; 'the lender must use 5% of the outstanding balance'; 'Lease Payments': 'regardless of the number of months remaining on the lease'; 'voluntary payments do not need to be taken into consideration'; 'Open 30–Day Charge Accounts': 'Fannie Mae does not require open 30–day charge accounts to be included in the debt-to-income ratio'; 'Student Loans': 'a payment equal to 1% of the outstanding student loan balance' or 'a fully amortizing payment using the documented loan repayment terms' · Checked October 17, 2026

7. According to Fannie Mae, if you are obligated on a non-mortgage debt but someone else actually repays it, the lender may exclude that payment from your monthly obligations; this does not apply if the person paying is an interested party to the purchase, such as the seller or the real estate agent; and to exclude it, the lender must obtain the most recent 12 months of canceled checks (or bank statements) from the person paying, with no late payments.

   Sources 4 · B3-6-05, 'Debts Paid by Others': 'the lender may exclude the monthly payment from the borrower's recurring monthly obligations'; 'not applicable if the other party is an interested party to the subject transaction (such as the seller or real estate agent)'; 'the most recent 12 months' canceled checks (or bank statements) from the other party making the payments'; 'with no delinquent payments' · Checked October 17, 2026

8. According to Fannie Mae, some obligations often shown on a paystub are not considered liabilities and are neither counted as debts nor deducted from gross income when calculating DTI: federal, state and local taxes; FICA and other retirement contributions, such as 401(k) accounts; commuting costs; union dues; and voluntary deductions.

   Sources 5 · B3-6-01, General Information on Liabilities (05/04/2022), 'Monthly Obligations Not Included in Liabilities': 'not considered a liability and will not be included as a debt or deducted from the borrower's gross income when calculating the borrower's debt-to-income ratio'; 'federal, state, and local taxes'; 'Federal Insurance Contributions Act (FICA) or other retirement contributions, such as 401(k) accounts'; 'commuting costs'; 'union dues'; 'voluntary deductions' · Checked October 17, 2026

9. According to Fannie Mae, if a current debt appears on the credit report but not on the loan application, the borrower is expected to give a reasonable explanation, and documentation may be required to support it.

   Sources 5 · B3-6-01: 'If a current liability appears on the credit report that is not shown on the loan application, the borrower should provide a reasonable explanation for the undisclosed debt. Documentation may be required to support the borrower's explanation.' · Checked October 17, 2026

10. For manually underwritten FHA loans, the underwriter must calculate two ratios: total mortgage payment to effective income (PTI) and total fixed payment to effective income (DTI); the total mortgage payment includes principal and interest, real estate taxes, hazard insurance, flood insurance as applicable, the mortgage insurance premium (MIP), HOA or condominium fees and other property charges; the total fixed payment is the total mortgage payment plus monthly obligations on all debts.

    Sources 10 · HUD Handbook 4000.1 (last revised 8/12/2026), II.A.5.d.vii, Calculating Qualifying Ratios (Manual), pp. 357–359: 'Total Mortgage Payment to Effective Income Ratio (PTI) and the Total Fixed Payment to Effective Income ratio, or DTI'; (B) Calculating Total Mortgage Payment: 'The total Mortgage Payment includes'; bullets P&I, 'real estate taxes', 'Hazard Insurance', 'Flood Insurance as applicable', MIP, 'HOA or condominium association fees or expenses'; (C) Calculating Total Fixed Payment: 'The total fixed payment includes'; bullets 'the total Mortgage Payment; and' and 'monthly obligations on all debts and liabilities' · Checked October 17, 2026

11. FHA applications are scored through TOTAL Mortgage Scorecard, with exceptions such as Streamline Refinances; when the result is 'Refer', the underwriter must underwrite them manually. In manual underwriting, the PTI/DTI caps are 31/43 with no compensating factors; 37/47 with one of: verified and documented cash reserves, minimal increase in housing payment, or residual income; 40/40 with no discretionary debt; and 40/50 with two factors; with a credit score of 500 to 579, or no credit score, the ratios may not exceed 31/43.

    Sources 10 · II.A.4.a.i, Use of TOTAL Mortgage Scorecard: 'All transactions must be scored through TOTAL Mortgage Scorecard, except Streamline Refinance transactions'; II.A.4.a.iv(C) Refer: 'The underwriter must manually underwrite any mortgage application for which the Feedback Certificate shows a Refer recommendation'; II.A.5.d.viii, Approvable Ratio Requirements (Manual), table on p. 358 (the PDF's column layout breaks the sentences across lines): row '500-579 or No' (Credit Score), 31/43: 'Borrowers with Minimum Decision Credit', 'with no credit score may not exceed', '31/43 ratios'; '580 and above 31/43 No compensating factors required'; '580 and above 37/47 One of the following'; 'verified and documented cash Reserves'; 'minimal increase in housing payment'; 'residual income'; '580 and above 40/40 No discretionary debt'; '580 and above 40/50 Two of the following' · Checked October 17, 2026

12. For FHA, effective income is income that may be used to qualify; it must be reasonably likely to continue through at least the first three years of the mortgage, and the lender may only consider income that is legally derived and, when required, properly reported as income on the borrower's tax returns.

    Sources 10 · II.A.4.c, Income Requirements (TOTAL), pp. 222–223: 'Effective Income refers to income that may be used to qualify a Borrower for a Mortgage'; 'reasonably likely to continue through at least the first three years of the Mortgage'; II.A.4.c.i: 'may only consider income if it is legally derived and, when required, properly reported as income on the Borrower's Tax Returns' · Checked October 17, 2026

13. According to Fannie Mae, for manually underwritten loans the maximum total DTI ratio is 36% of the borrower's stable monthly income, and it can be exceeded up to 45% if the borrower meets the credit score and reserve requirements in its Eligibility Matrix; for loans underwritten through Desktop Underwriter (DU), the maximum allowable DTI ratio is 50%.

    Sources 3 · B3-6-02, 'Maximum DTI Ratios': 'For manually underwritten loans, Fannie Mae's maximum total DTI ratio is 36% of the borrower's stable monthly income'; 'The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix'; 'For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%'; Chapter B3-2, 'Desktop Underwriter (DU)' · Checked October 17, 2026

14. According to Fannie Mae, if the borrower discloses or the lender discovers additional debts or reduced income after the underwriting decision and up to closing, the lender must recalculate the DTI; if it exceeds 45% on a manually underwritten loan or 50% on a DU loan, the loan is not eligible for delivery to Fannie Mae; and the final loan application signed by the borrower must include all income and debts verified, disclosed or identified during the process.

    Sources 3 · B3-6-02, 'Applying the Re-underwriting Criteria', steps 3–5: 'The lender must recalculate the DTI ratio'; 'If the recalculated DTI ratio exceeds 45% for a manually underwritten loan or 50% for a DU loan casefile, the loan is not eligible for delivery to Fannie Mae'; 'The final loan application signed by the borrower must include all income and debts verified, disclosed, or identified during the mortgage process' · Checked October 17, 2026

15. Fannie Mae acknowledges that lenders sometimes apply a more conservative approach when qualifying borrowers, and accepts it as long as its minimum requirements are met and the lender consistently applies the same approach to similar loans.

    Sources 3 · B3-6-02, Note: 'lenders may sometimes apply a more conservative approach when qualifying borrowers. This is acceptable as long as Fannie Mae's minimum requirements are met, and lenders consistently apply the same approach to similar loans.' · Checked October 17, 2026

16. According to Fannie Mae, liquid financial reserves are the liquid or near-liquid assets available to the borrower after the mortgage closes, measured in the number of months of the new mortgage payment they could cover.

    Sources 9 · B3-4.1-01, Minimum Reserve Requirements (08/07/2024): 'liquid or near liquid assets that are available to a borrower after the mortgage closes'; 'measured by the number of months of the qualifying payment amount for the subject mortgage' · Checked October 17, 2026

17. For VA loans, the two primary standards for judging income are the debt-to-income ratio and residual income analysis, and ordinarily the veteran must meet both; the ratio adds the house payment (principal, interest, taxes and insurance), assessments such as HOA or condominium fees and long-term obligations, divided by gross income; the standard is 41 percent or less; above 41 percent, the loan may be approved with a justification signed by the underwriter's supervisor; and meeting both standards does not mean the loan is automatically approved.

    Sources 11 · 38 CFR §36.4340(c): 'debt-to-income ratio and residual income analysis'; 'Ordinarily, to qualify for a loan, the veteran must meet both standards'; (c)(2): 'the loan may be approved with justification, by the underwriter's supervisor'; (c)(4): 'meeting both the debt-to-income ratio and residual income standards does not mean that the loan is automatically approved'; (d): 'divided by the total of gross salary or earnings and other compensation or income'; 'The standard is 41 percent or less' · Checked October 17, 2026

18. For VA loans, residual income analysis measures whether the veteran will have enough income left each month for living expenses after paying the estimated housing expense and other obligations; every member of the household is counted, even if the spouse is not on the loan or the title; the minimums come from tables of residual income by region and family size, used as a guide; for active-duty servicemembers or military retirees, those figures are reduced by at least 5% if there is a clear indication that the borrower or spouse will keep using the facilities of a nearby military base; if the debt-to-income ratio is above 41% but residual income exceeds the guidelines by at least 20%, the second-level review and statement of justification are not required; and acceptable compensating factors include excellent long-term credit, minimal consumer debt, long-term employment, significant liquid assets, little or no increase in shelter expense and high residual income.

    Sources 11 · 38 CFR §36.4340(e), Residual income guidelines: 'adequate to meet living expenses after estimated monthly shelter expenses have been paid and other monthly obligations have been met'; 'All members of the household must be included in determining if the residual income is sufficient'; 'even if the veteran's spouse is not joining in title or on the note'; 'Table of residual incomes by region'; 'Family size'; 'are to be used as a guide'; (e)(4), Military adjustments: 'the residual income figures will be reduced by a minimum of 5 percent'; 'use of facilities on a nearby military base'; (c)(3): 'If the ratio is greater than 41 percent and the residual income exceeds the guidelines by at least 20 percent, the second level review and statement of justification are not required'; (c)(5): 'Excellent long-term credit'; 'Minimal consumer debt'; 'Long-term employment'; 'Significant liquid assets'; 'Little or no increase in shelter expense'; 'High residual income' · Checked October 17, 2026

19. USDA's guaranteed loan program uses two ratios: the PITI ratio (principal, interest, taxes and insurance, plus HOA dues, the monthly share of the annual fee and other property assessments), which may not exceed 29 percent of the applicant's repayment income, and the total debt ratio (PITI plus recurring monthly debts), which may not exceed 41 percent; personal income taxes, retirement contributions, savings, commuting costs, union dues, childcare and other voluntary obligations are not counted in total debt; and the ratios may exceed those percentages when compensating factors exist.

    Sources 12 · 7 CFR §3555.151(h)(1): 'principal, interest, taxes and insurance (PITI) ratio and total debt (TD) ratio'; 'does not exceed 29 percent of the applicant's repayment income'; 'does not exceed 41 percent of the applicant's repayment income'; (h)(1)(iii): 'will not be considered in the TD ratio'; (h)(2): 'The repayment ratio may exceed the percentage in paragraph (h)(1) of this section when certain compensating factors exist' · Checked October 17, 2026

20. According to Fannie Mae, paying off or paying down debt solely to qualify must be carefully evaluated, and the borrower's history of credit use is a factor; generally, installment loans paid down to 10 or fewer remaining payments do not need to be included in long-term debt, and if a revolving account balance is paid off at or before closing, its payment is not included in DTI and the account does not need to be closed.

    Sources 6 · B3-6-07, Debts Paid Off At or Prior to Closing (04/05/2023): 'Payoff or paydown of debt solely to qualify must be carefully evaluated'; 'The borrower's history of credit use should be a factor'; 'Installment loans that are being paid off or paid down to 10 or fewer remaining monthly payments do not need to be included'; 'not included in the debt-to-income (DTI) ratio'; 'Such accounts do not need to be closed' · Checked October 17, 2026

21. According to Fannie Mae, the lender must document that income is stable, has a documented history of receipt and is reasonably expected to continue; and income from a borrower who will not live in the home may be considered in qualifying if it meets the same standards required for borrowers who will live there.

    Sources 7 · B3-3.1-01, General Income Information (10/07/2026): 'The lender must document income is stable, has a documented history of receipt, and is reasonably expected to continue'; 'Income from a non-occupant borrower may be considered in qualifying for both DU and manually underwritten loans provided the income meets the same standards as required for occupying borrowers' · Checked October 17, 2026

22. According to Fannie Mae, a borrower who will not live in the home signs the note and has joint liability for it with the other borrowers; DU considers the income, assets, liabilities and credit of every borrower, whether or not they will live in the home; and for manually underwritten loans that use the income of a guarantor, co-signer or non-occupant borrower, the maximum DTI calculated using only the income of the borrowers who will live there is 43%.

    Sources 8 · B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction (09/02/2020): 'sign the mortgage or deed of trust note'; 'have joint liability for the note with the borrower(s)'; 'DU will consider the income, assets, liabilities, and credit of that borrower'; 'Using only the income of the occupying borrower(s) to calculate the DTI ratio, the maximum allowable DTI ratio is 43%' · Checked October 17, 2026

23. According to the CFPB, housing counselors provide advice on buying a home, renting, defaults, forbearances, foreclosures and credit issues; the agencies on its list are approved by HUD and offer independent advice, often at little or no cost; you can search for one by ZIP code.

    Sources 13 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'approved by the U.S. Department of Housing and Urban Development (HUD) and they can offer independent advice, often at little or no cost to you'; 'Search by ZIP code' · Checked October 17, 2026