Question 1

What is Debt-to-Income (DTI) ratio?

Accepted Answer

DTI ratio compares your monthly debt payments to your gross monthly income. Front-End DTI is housing costs (mortgage/rent) ÷ income. Back-End DTI is all monthly debts ÷ income. Lenders use DTI to assess your ability to manage loan payments.

Question 2

What is a good DTI ratio?

Accepted Answer

For conventional loans: Front-End DTI under 28% and Back-End DTI under 36% is excellent. For FHA loans: Front-End DTI 31-43% and Back-End DTI 36-50% may be acceptable. Lower ratios improve loan eligibility and interest rates.

Question 3

How do I improve my DTI ratio?

Accepted Answer

Improve DTI by: 1) Increasing income, 2) Reducing monthly debt payments (pay off debts, refinance to lower rates), 3) Reducing housing costs, or 4) A combination. Focus on high-interest debts first for maximum impact.

Question 4

What's the difference between Front-End and Back-End DTI?

Accepted Answer

Front-End DTI only includes housing costs (mortgage/rent). Back-End DTI includes all monthly debts (housing, car loans, credit cards, student loans, etc.). Lenders typically focus on Back-End DTI as it shows your total debt burden.

Question 5

Can I still get a loan with a high DTI?

Accepted Answer

High DTI (over 43% back-end) may still qualify for FHA loans with compensating factors (high credit score, large down payment, significant savings). However, lower DTI improves approval chances and interest rates. Work on reducing DTI before applying.

DTI Calculator - Debt-to-Income Ratio

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