How Debt-To Income Ratio Are Calculated

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Debt-To Income Ratios (DTI) play a significant role in qualifying for a mortgage.  Long gone are the days where a Borrower's DTI Ratios could be 67% and higher.  Today most loan products require a DTI Ratio of 45% or less.  One of the few exceptions is FHA which still allows DTI Ratios in the 50+% range.  For this reason it is important for Borrowers to understand How Debt-To Income Ratio Are Calculated in order to lower them as much as possible.

A Debt-To-Income Ratios is the Percentage of the Borrower(s) Monthly Debt versus the Borrower(s) Monthly Income.  In other words the Borrower(s) Debt divided by the Borrower(s) Income = Debt-To-Income Ratio (DTI). For example if the Borrower(s) have $2,000 in Monthly Debt, and $5,000 of Monthly Income:

$2,000/$5,000 = .40% DTI 

Every Borrower(s) has TWO Debt-To-Income Ratios: 

  • The first is the Housing Ratio, known as the "Front or Top Ratio"
  • The second is the Total Debt-To-Income Ratio, known as the "Back or Bottom Ratio". 

The following is what is included in each Ratio.  As I list each debt that is calculated into the Debt-To-Income Ratio's, I will indicate if the debt is just specific to a Loan Program.

Housing Ratio more commonly known as the "Front or Top Ratio" consists of:

  • The Loan Principle & Interest
  • Property Taxes
  • Homeowners Insurance (hazard insurance)
  • Homeowners or Condo Association Fees (HOA) Note: only if the property is located in a development that has a Homeowners Association.
  • Private Mortgage Insurance (PMI) - Only on Conventional, or USDA Rural Loans.  Note: There is no PMI on Conventional Loans if Borrower's Down Payment is 20% or more.
  • Monthly Insurance Premium (MIP) - Is only on FHA Loans
  • Down Payment Assistance Loans
  • Second Mortgage, Line of Credit, if it is done at the same time as the First Mortgage. 

Total Debt-To-Income Ratio more commonly known as the "Back or Bottom Ratio" consists of all the debts which were included in the Housing Ratio plus:

  • All Monthly Revolving Debt such as:
    • Credit Cards
    • Loans such as:
      • Car Loans
      • Student Loans
      • Personal Loans
        Second Mortgage, Home Equity, & Line of Credit.
  • Child Day Care - Only on VA Loans.
  • Child Support Payments
  • Alimony Payments
  • Existing Mortgage Payments (second home, investment property, etc.)

I hope I have been able to provide the above information on How Debt-To Income Ratio Are Calculated, in an easy to understand format, and help Borrower(s) to understand what debts they can reduce to lower their Total Debt-To-Income Ratio.




 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or


Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Brigita McKelvie, Associate Broker 08/30/2015 10:56 PM
  2. Frank Rubi 08/30/2015 10:58 PM
  3. Maria Gilda Racelis 08/31/2015 10:04 PM
  4. Roy Kelley 10/03/2015 07:00 PM
  5. Chris Mamone 09/02/2015 03:05 PM
  6. Kate McQueen 09/04/2015 04:28 AM
  7. Lisa Friedman 01/16/2016 05:50 AM
  8. 1~Judi Barrett 01/16/2016 10:53 AM
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Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi George - While we seldom get involved in these calculations or our clients' finances - the advantage of having and trusting an excellent lender - it's good to know how these are calculated.

Aug 31, 2015 05:10 AM #20
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

 Great math George Souto...Buyers need to know how their debts....add up !

Aug 31, 2015 08:27 AM #21
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

George Souto this is something that I never understood - until today!

And you know this post is a keeper for me. Thanks a lot for sharing your expertise.

Aug 31, 2015 01:22 PM #22
Alan Kirkpatrick
Austin Texas Homes - Round Rock, TX
Alan in Austin

George Souto 

Great way to explain this and make it very clear. Have a great week. 

Aug 31, 2015 02:09 PM #23
Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

Great and very useful information George, congratulations on the feature, well deserved.

Aug 31, 2015 02:12 PM #24
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning George. Great job with your post, a well deserved feature. Debt ratio can often be the challenge that kills some mortgage applications, especially when it comes to self employed borrowers.

Aug 31, 2015 06:47 PM #25
Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Hi George: I love it when you write blogs about topics that affect mortgages. We Realtors should understand this as well. I just bookmarked this.

Aug 31, 2015 09:59 PM #26
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi George, as a Realtor, I don't get involved with my buyer's financials but we should all know how deb-to-income ratio is calculated, great explanation. Thank you!

Aug 31, 2015 10:47 PM #27
David A. Weaver
Peoples Bank & Trust Co. - Scottsdale, AZ
24 years helping folks finance their dreams.

Well done George, once again you've done the mortgage industry proud.  In today's world of fully documented loans, knowing what's what up front will eliminate a lot of frustration at the end.

Sep 01, 2015 04:40 AM #28
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Fantastic tutorial here, George Souto ... and easily followed.  Most have no clue as to how this is arrived at and how the results trickle down to "approvability" ..


Sep 01, 2015 06:32 AM #29
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

This is the way we old timers used to calculate and qualify. It still works even today when new agents have no idea how to do it. Good post George.

Sep 01, 2015 12:39 PM #30
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

George, what a helpful post!  As a newbie, we were trained on how to do this, but over the years things have changed and it's great to have this as a resource.

Sep 02, 2015 03:01 AM #31
Mary Yonkers
Alan Kells School of Real Estate/Howard Hanna Real Estate - Erie, PA
Erie/PA Real Estate Instructor

Thanks George Souto  for well-written and easy to understand explanation of how Debt to Income is calculated.  This will be helpful for buyers as well as agents.

Sep 03, 2015 08:03 AM #32
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Great two articles on Debt Ratio's, Bookmarked again  :-)


Sep 03, 2015 11:12 PM #33
Jerry Newman
Brown Realty, 210-789-4216, - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi George, Many first timers need to know and to understand these calculations, and certainly the seasoned home buyers need to remember this as well.

Sep 04, 2015 06:51 AM #34
Randy Hilman, Associate Broker
Randy Hilman Homes - Moultonborough, NH
What Matters to You, Means Everything to Me!

Good morning, George Souto.  I just read your blog post this  morning, as it was re-posted by Roy Kelley.  I have heard talk that lenders now take into consideration one's daily living expenses in their calculations of debt to income. Is this happening?  Is it permissible?  I mean, does a lender have the right to know how often I go to the grocery and liquor store?  Please share your knowledge and insights.   

Oct 03, 2015 11:02 PM #35
Lisa Friedman
Great American Dream Realty - Essex, VT
30 Years of Real Estate Experience!

George, This is a very well written and detailed post with very valuable information. Thank you for providing.

Dec 02, 2015 12:53 AM #36
Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

George - Great job explaining debt-to-income ratios, and where they need to be. Thanks for sharing.

Jan 16, 2016 08:57 AM #37
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Wow, How did I miss this back in August?  I came by way of Lisa's re-blog.. I need to re-blog this one for my clients too!  

Jan 16, 2016 10:51 AM #38
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

George Souto Thanks for the detailed information on the depth to income ratio. 

Jan 16, 2016 12:37 PM #39
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