May 25, 2022
A good Debt-to-Income Ratio (DTI) to get approved for a mortgage is under 36%. A higher ratio could mean you'll pay more in interest or not get the loan.
Your Debt-to-Income Ratio, or DTI, is the percentage of your monthly gross income that goes toward paying your debts, and it helps a lender decide how much you can safely borrower.
Divide your monthly debt obligations by your pretax, or gross, monthly income. (DTI generally leaves our monthly expenses such as food, utilities, transportation costs and health insurance.)
You'll want the lowest DTI not just to qualify but to get the best possible interest rate and terms for your home loan to be sure you can comfortable afford all your monthly obligations.
This is also known as your housing ratio. The front-end ratio is the dollar amount of your home-related expenses, such as your future monthly mortgage payment including property taxes, insurance and any homeowners association dues - divided by your monthly gross income.
Your back-end ratio includes all other debts you pay on a monthly basis, such as credit cards, auto loans, personal loans, and student loans - in addition to your home-related expenses - divided by your monthly gross income.
A good target for a front-end DTI ratio is below 28%, and a for a back-end target DTI is below 36%.
You can qualify for a mortgage with highter DTI ratios, but the interest rate might be higher.