Your debt-to-income ratio (DTI) for a mortgage is your total monthly debt payments, including the new house payment, divided by your gross monthly income (before taxes). If you earn $6,000 a month and your debts plus the new payment total $2,400, your DTI is 40%. Published limits vary by loan: Fannie Mae allows up to 50% through its automated system, FHA's manual guidelines range from 43% to 50% depending on compensating factors, VA uses 41% as a guideline plus a residual income test, and USDA uses 29% housing and 41% total unless compensating factors support more.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. DTI is the number I check first when someone in Killeen, Temple, or Waco asks if they can buy, because it decides the payment you can qualify for. My how much house can I afford guide covers the full budget, including cash to close. This guide goes deeper on DTI itself: how it's computed, which debts count under each program, and what moves the number. Sources are Fannie Mae's Selling Guide, HUD Handbook 4000.1, VA's Lenders Handbook and regulations, USDA's regulations, and the CFPB.
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How to Calculate Your Debt-to-Income Ratio
The CFPB defines DTI as all your monthly debt payments divided by your gross monthly income. Lenders look at two versions:
- Front-end ratio (housing ratio): the new monthly housing payment divided by gross monthly income. FHA calls this the payment-to-income ratio (PTI); USDA calls it the PITI ratio.
- Back-end ratio (total DTI): the housing payment plus all other monthly debts, divided by gross monthly income. When someone says "DTI," this is usually what they mean.
The three steps:
- Add up monthly debts from your credit report and loan application, plus obligations like child support.
- Add the proposed housing payment.
- Divide by gross monthly income and round. VA, for example, rounds to the nearest two digits.
What Goes Into the Housing Payment
HUD's list for FHA is a good checklist for any loan:
- Principal and interest
- Property taxes
- Homeowners insurance and any flood insurance
- Mortgage insurance (FHA MIP, or PMI on conventional)
- HOA dues, ground rent, and special assessments
- Payments on any second mortgage
In Central Texas, property taxes are often the piece that tips DTI. A lender should estimate them on the home's full value with your own exemptions, not the seller's bill; my Bell County Appraisal District guide explains why.
A Worked DTI Example
Hypothetical buyer:
| Item | Monthly Amount |
|---|---|
| Gross income (two incomes combined) | $6,000 |
| Car payment | $400 |
| Student loan (payment on credit report) | $200 |
| Credit card minimum payments | $50 |
| Proposed housing payment (principal, interest, taxes, insurance, mortgage insurance) | $1,700 |
- Front-end ratio: $1,700 / $6,000 = 28.3%
- Back-end ratio: ($1,700 + $400 + $200 + $50) / $6,000 = $2,350 / $6,000 = 39.2%
That would fit FHA's base manual ratios of 31/43, USDA's 29/41, and VA's 41% guideline. Swap in a $550 truck payment instead of $400, and the back-end ratio rises to 41.7%, over VA's and USDA's base guidelines, where compensating factors or residual income start to matter. Round, made-up numbers for illustration only, not a quote or an approval.
DTI Limits by Loan Type
| Loan Type | Published DTI Guideline | Source |
|---|---|---|
| Conventional (Fannie Mae), manual underwriting | 36%; up to 45% with required credit score and reserves | Fannie Mae B3-6-02 |
| Conventional (Fannie Mae), DU | Up to 50% | Fannie Mae B3-6-02 |
| FHA, manual, score 500-579 or no score | 31% housing / 43% total, no exceptions | HUD 4000.1 |
| FHA, manual, score 580+ | 31/43 with no compensating factors; 37/47 with one; 40/40 with no discretionary debt; 40/50 with two | HUD 4000.1 |
| FHA, TOTAL Scorecard approval | Follows the automated finding | HUD 4000.1 |
| VA | 41% guideline, plus residual income | 38 CFR 36.4340; VA M26-7 Ch. 4 |
| USDA Guaranteed | 29% housing / 41% total; higher with compensating factors and GUS acceptance or RD approval | 7 CFR 3555.151(h) |
FHA compensating factors for manual loans include verified cash reserves, a minimal increase in housing payment, residual income, and for the 40/50 tier, significant additional income not counted in qualifying income. FHA's Energy Efficient Homes can stretch to 33/45 on manual loans.
USDA compensating factors listed in the regulation: a credit score of 680 or higher, a minimal increase in housing expense, the ability to save and keep reserves after closing, and continuous employment with your current primary employer.
Texas assistance program limits: if you pair a loan with Texas assistance, the program can be stricter. TDHCA's Lender Guide (effective August 26, 2026) says to follow the automated findings for DTI, but caps manually underwritten FHA, VA, and USDA loans at 45%, with a 620 minimum score. TSAHC's guidelines (revised September 9, 2026) cap manually underwritten FHA loans at 45% with a 640 minimum score. See Texas first-time home buyer programs.
What Debts Count in DTI
The rules are close across programs, but the details matter, especially for student loans.
Installment Loans (Car, Personal, Furniture)
- Fannie Mae: counts installment debts with more than 10 monthly payments left, and fewer if the payment significantly affects your ability to pay.
- FHA: counts them unless they'll be paid off within 10 months of closing and all such payments together are 5% or less of gross monthly income. HUD says you can't pay down a balance just to meet the 10-month rule.
- VA: generally counts debts with 10 or more months remaining.
Credit Cards and Revolving Accounts
- Lenders use the minimum payment on your credit report or statement.
- If no payment shows, Fannie Mae and FHA use 5% of the balance. DU uses the greater of $10 or 5%.
- FHA counts authorized-user accounts unless the lender documents the primary holder made every payment for the past 12 months.
Student Loans: The Biggest Program Difference
| Loan Type | What the Lender Uses |
|---|---|
| Conventional (Fannie Mae) | The payment on the credit report; a documented $0 income-driven payment can count as $0; for deferred or forbearance loans, 1% of the balance or the fully amortizing payment |
| FHA | The reported or documented payment if above $0; if the credit report shows $0, then 0.5% of the balance |
| VA | Excluded if deferred at least 12 months past closing; otherwise 5% of the balance divided by 12, unless the credit report shows more or a servicer statement dated within 60 days of closing documents a lower payment |
Hypothetical: a $30,000 student loan with a $0 payment on the credit report (deferred, not on an income-driven plan):
- Fannie Mae, 1% of balance: $300 a month
- FHA, 0.5% of balance: $150 a month
- VA, if not deferred 12+ months past closing: $30,000 x 5% / 12 = $125 a month
The same loan could add anywhere from $0 to $300 to your monthly debts depending on the program and the paperwork. If you have student loans, send me your servicer statement early.
Other Obligations
- Leases: Fannie Mae counts lease payments regardless of how many months are left.
- Child support, alimony, and separate maintenance: counted. Fannie Mae counts them if they extend beyond 10 months, and allows alimony (not child support) to be deducted from income instead.
- Rental property losses: a net loss from a rental counts as debt under Fannie Mae.
- HELOCs and garnishments: Fannie Mae counts HELOC payments and garnishments that run more than 10 months.
What USDA Says It Leaves Out
USDA's regulation lists items that are not part of its total debt ratio: personal income taxes, retirement contributions (including repaying a 401(k) loan), savings, commuting costs, union dues, childcare, and other voluntary obligations. Those still matter for your real-life budget, even when they don't count against DTI.
VA Residual Income: The Second Test
VA looks past DTI to residual income, the money left each month after taxes, the housing payment, maintenance and utilities, and debts, to cover family living expenses. Texas is in VA's South region. VA's minimums for loans of $80,000 and above:
| Family Size | Minimum Residual Income (South) |
|---|---|
| 1 | $441 |
| 2 | $738 |
| 3 | $889 |
| 4 | $1,003 |
| 5 | $1,039 |
| Over 5 | Add $80 for each additional member, up to 7 |
How VA applies it:
- Everyone in the household counts, including dependents claimed on your tax return, even if they aren't on the loan.
- Military discount: the residual figure drops by 5% for active-duty or retired servicemembers, or when the borrower clearly will use nearby military facilities. That's common around Fort Cavazos and Killeen.
- Maintenance and utilities are estimated at 14 cents per square foot of living area; VA's example is a 1,500-square-foot home at $210 a month.
- Over 41% DTI: VA requires a supervisor's justification unless residual income exceeds the guideline by at least 20%.
- Nontaxable income: VA lets lenders "gross up" verified tax-free income, such as certain military allowances or VA disability pay, to 125% for the DTI ratio only.
Hypothetical: a family of three buying a 1,600-square-foot home near Fort Cavazos has $4,900 a month in take-home income after taxes. Subtract a $1,700 housing payment, $650 in debts, and $224 for maintenance and utilities (1,600 x $0.14), and about $2,326 remains. That's well above $889, and above the 20% cushion of about $1,067. Made-up numbers for illustration only. For more on VA, see my VA loans page.
How to Lower Your DTI Before You Apply
- Pay off small installment debts that are close to done. Check the program rule first: FHA won't let you pay a balance down just to get under 10 months.
- Pay down credit cards to lower the minimum payments, and avoid new financing (car, furniture) before closing.
- Get student loan paperwork in order. A servicer statement can replace a higher calculated payment under Fannie Mae and VA rules.
- Add a co-borrower. USDA's regulation specifically lets other eligible household members join the application to increase repayment ability.
- Lower the housing payment: a lower price, a larger down payment, or down payment assistance that reduces the first loan. See down payment assistance in Texas.
- Look at a Mortgage Credit Certificate. USDA's regulation says an MCC may be considered in repayment ability. See my MCC guide.
- Know what doesn't help qualifying: a temporary rate buydown lowers early payments, but Fannie Mae, FHA, VA, and USDA all qualify you at the full note rate.
Frequently Asked Questions
How do you calculate debt-to-income ratio for a mortgage?
Add up your monthly debt payments, including the proposed house payment with taxes, insurance, and mortgage insurance, then divide by your gross monthly income before taxes. For example, $2,350 in monthly debts and housing payment divided by $6,000 of gross monthly income is a DTI of about 39%.
What is the difference between front-end and back-end DTI?
The front-end ratio compares only the new housing payment to gross monthly income. The back-end ratio adds all other monthly debts, such as car loans, student loans, and credit card minimums, to the housing payment. FHA's manual guideline of 31/43 means a 31% front-end and 43% back-end ratio.
What is the maximum DTI for an FHA loan?
For manually underwritten FHA loans, HUD allows 31% housing and 43% total with no compensating factors, 37/47 with one, 40/40 with no discretionary debt, and 40/50 with two compensating factors for borrowers with scores of 580 or higher. Loans approved through FHA's TOTAL Scorecard follow the automated finding.
How are student loans counted in DTI?
It depends on the loan. Fannie Mae uses the credit report payment, allows a documented $0 income-driven payment, and uses 1% of the balance for deferred loans. FHA uses 0.5% of the balance when the reported payment is $0. VA excludes loans deferred at least 12 months past closing and otherwise uses 5% of the balance divided by 12 unless a lower payment is documented.
What is VA residual income?
Residual income is the money left each month after taxes, the housing payment, maintenance and utilities, and debts. For VA loans of $80,000 or more in the South region, which includes Texas, the minimum is $441 for one person, $738 for two, $889 for three, $1,003 for four, and $1,039 for five, plus $80 for each added member up to seven.
Not Sure Where Your DTI Lands?
Send me your debts and income, and I'll run your front-end and back-end ratios under conventional, FHA, VA, and USDA rules so you can see which loan gives you the most room.
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Related Guides
- How Much House Can I Afford in Texas?
- FHA Loan Requirements in Texas
- USDA Loan Requirements in Texas
- FHA vs. Conventional Loans in Texas
- VA Loans
- Texas First-Time Home Buyer Programs
Sources
- CFPB: What is a debt-to-income ratio?
- Fannie Mae Selling Guide: B3-6-02, Debt-to-Income Ratios (04/02/2025) and B3-6-05, Monthly Debt Obligations (08/05/2026)
- HUD: Single Family Housing Policy Handbook 4000.1 (last revised August 12, 2026): liabilities, student loans, total mortgage payment, and manual underwriting ratio matrix
- U.S. Department of Veterans Affairs: 38 CFR 36.4340 and Lenders Handbook (M26-7), Chapter 4, Credit Underwriting
- USDA Rural Development: 7 CFR 3555.151, Eligibility Requirements
- Texas Department of Housing and Community Affairs: Lender Guide (effective August 26, 2026)
- Texas State Affordable Housing Corporation: Guidelines for Down Payment Assistance and Mortgage Credit Certificates (revised September 9, 2026)
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit approval and program guidelines, and approval, rates, and program availability are not guaranteed. This article is general information, not legal or tax advice. Not affiliated with or endorsed by Fannie Mae, HUD, the Federal Housing Administration, the U.S. Department of Veterans Affairs, USDA Rural Development, TDHCA, TSAHC, the CFPB, or any government agency. Contact your lender or the agency directly for official underwriting guidelines.