What Is Debt-to-Income Ratio, and Why Does It Matter?
- By Jim Blackburn
- on
- 100 first time home buyer FAQs
DTI Measures How Much of Your Income Goes to Debt
Your debt-to-income ratio is the percentage of your gross monthly income (before taxes) that goes toward paying your debts. That includes:
- Student loans
- Auto loans
- Credit card payments
- Personal loans
- And your future mortgage payment
So if you earn $5,000 a month and $2,000 goes to debt, your DTI is 40%. The lower your DTI, the stronger your financial position looks to a lender.
Understanding how your DTI affects what you can afford is crucial. Calculate your Conventional Purchase Loan Payment now to see how different debt levels impact your maximum loan amount and monthly payment.
Lenders Use DTI to Decide How Much You Can Borrow
DTI tells lenders how easily you’ll be able to afford your monthly mortgage payment on top of your existing obligations. A high DTI can raise red flags, even if your credit score is solid. Most mortgage programs require your DTI to be below 43%, though some loans allow exceptions with strong compensating factors.
If your DTI is borderline, FHA loans offer more flexibility. Calculate your FHA Purchase Loan Payment now to explore how FHA’s more lenient DTI requirements might help you qualify when conventional loans won’t.
Lowering Your DTI Boosts Your Buying Power
Want to qualify for more home—or just get approved faster? Start by:
- Paying down credit cards
- Avoiding new debts before applying
- Increasing your income (even temporarily) to shift the ratio
Even small changes can make a big difference. And the best part? Knowing your DTI helps you shop smart and stay in control.
Ready to understand your complete financial picture? Visit our Buy a House page for comprehensive resources about DTI, credit requirements, and preparing financially for homeownership.
Want to Know Your Debt-to-Income Ratio Today?
At Stairway Mortgage, we help first-time buyers understand the numbers—so they can own with confidence and clarity.
📘 Download our homebuyer guides with DTI calculators.
🧮 See your buying power with our Conventional Purchase Calculator.
🏠 Learn more on our Buy a House page.
📊 Check Current Rates and understand your options.
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