A dti of 50 or less will give you the most options when you re trying to qualify for a mortgage. The back end ratio may be referred to as the debt to income ratio but both ratios are usually factored in when a lender says they re considering a borrower s dti.
Your debt to income ratio how much you pay in debts each month compared to your gross monthly income is a key factor when it comes to qualifying for a mortgage.
Mortgage debt to income ratio. Of course the lower your debt to income ratio the better. Though the front end dti isn t as important most lenders prefer to see it at 31 or lower 29 for usda loans. In general you need a back end dti of 36 or lower.
Ideally lenders prefer a debt to income ratio lower than 36 with no more than 28. Your dti helps lenders gauge how risky you ll be as a borrower. The 43 percent debt to income ratio is important because in most cases that is the highest ratio a borrower can have and still get a qualified mortgage.
As a general guideline 43 is the highest dti ratio a borrower can have and still get qualified for a mortgage. For instance a small creditor must consider your debt to income ratio but is allowed to offer a qualified mortgage with a debt to income ratio higher than 43 percent. To determine your dti ratio simply take your total debt figure and divide it by your income.
For instance if your debt costs 2 000 per month and your monthly income equals 6 000 your dti is 2 000 6 000 or 33 percent. Expressed as a percentage a debt to income ratio is calculated by dividing total recurring monthly debt by monthly gross income. There are some exceptions.
Lenders prefer to see a debt to income ratio smaller than 36 with. The ideal debt to income ratio for aspiring homeowners is at or below 36. If your credit score is high enough conventional loans may allow for dtis up to 50.
The ideal debt to income ratio for mortgages while 43 is the highest debt to income ratio that a homebuyer can have buyers can benefit from having lower ratios.