Qualifying
Debt-to-income ratio (DTI)
The share of your gross monthly income that goes to debt payments. Lenders use it to gauge how much mortgage you can handle, generally capping total DTI around 43%.
What does debt-to-income ratio mean?
DTI is the number that most often decides a mortgage approval. Lenders look at two figures: the front-end ratio (housing payment ÷ income) and the back-end ratio (all debts ÷ income), the latter mattering most.
The common ceiling is 43% back-end, with conventional pricing best under 36% and FHA stretching toward 45–50% with compensating factors.
A Michigan example
A buyer earning $6,000 a month has $2,580 of room at a 43% back-end limit. If a $700 car payment and $200 in card minimums already use $900, only $1,680 is left for the full housing payment — including taxes and insurance.
Common questions
What DTI do lenders allow?
Generally up to 43% total, with the best conventional pricing under 36%. FHA can stretch toward 45–50% with strong compensating factors like reserves or a high credit score, so the ceiling varies by loan type.
What counts in my DTI?
Your future housing payment plus recurring debts: car loans, student loans, credit-card minimums, and support payments. Utilities and groceries don't count, but the full PITI does — including Michigan property taxes.
How do I lower my DTI to qualify?
Pay off a loan, avoid new debt before applying, add a co-borrower's income, or target a lower price. Closing one car loan can tip a borderline Michigan approval, often more effectively than a bigger down payment.
Related terms