How to Get a Mortgage with a High DTI Ratio (2024 Update)

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By Steve Nicastro Updated December 4, 2023


Your debt-to-income (DTI) ratio is a key factor in determining mortgage approval, as it assesses your ability to take on new debt. Getting a mortgage with a high DTI ratio can be challenging, but it's not always a dealbreaker.

Some mortgage lenders may still greenlight your application if you have a good credit rating (670 FICO or higher) and a strong income. They often provide tailored mortgage solutions just for this scenario.

You can also actively improve your DTI before applying for a mortgage. For example, trimming debt or boosting your income through a raise at your primary job can quickly tip the scales in your favor.

If you're looking to buy a house, you can simplify the mortgage approval process with a skilled local buyer's agent. Their established lender relationships and expertise in preparing applications boost your approval chances. Start now by finding a top agent in your area.

What is debt-to-income ratio?

DTI ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments and is used by lenders to determine your borrowing power, says Makenzie Wall, a loan officer at Society Mortgage

Research from the National Association of Realtors found that a high DTI ratio is the biggest reason lenders deny a mortgage application. It's a critical factor in determining how much of a payment you can afford without stretching your finances.

However, several loan officers we contacted, including Wall, argued that credit score and DTI ratio are equally important and go hand-in-hand.

"You might have the best credit score in the world, but your DTI ratio can be too high to qualify or vice versa," Wall explains. 

DTI ratio example

Calculating your DTI ratio is straightforward.  You add up all of your monthly debt payments (car loans, student loans, credit card payments) and divide it by your monthly income. 

Let's say you owe $4,000 per month, including student loans, car loans, and credit cards, and you bring home a monthly gross income of $10,000.  

Your DTI ratio would be 40% ($4,000 divided by $10,000 = 0.40). After covering your debts, you have $6,000 left each month for living expenses and potentially, a mortgage payment.

Two types of DTI ratio

Front-end DTI measures the percent of your income that goes toward housing costs only. For instance, if you spend $3,000 on rent or a mortgage and earn $10,000 a month, your front-end DTI would be 30%.

Back-end DTI is the go-to ratio for most mortgage applications. It's a broader measure, capturing not just housing costs but all your monthly debt obligations — student loans, car payments, and credit card bills.

What is an acceptable DTI ratio?

There isn't a one-size-fits-all number for an ideal or maximum DTI ratio. 

"An acceptable DTI ratio will depend on your credit score," says John Pagano, a loan officer at Society Mortgage. "The better your credit, the higher you can go on your ratio." 

Some guidelines exist to help both lenders and borrowers better understand DTI ratio requirements.

  • The FDIC suggests that for front–end DTI, lenders prefer 28% or less.
  • For back-end DTI, which includes all of your monthly debts, Fannie Mae's guidelines suggest a ceiling of 36%. However, some borrowers secure loans with DTI ratios up to 45%, especially if they have solid credit scores and a large nest egg. 

A DTI of 36% or lower is generally ideal for homeowners, according to the Consumer Financial Protection Bureau.

What is the maximum DTI by loan type?

Loan typeDTI ratio max

While there are federal benchmarks for DTI ratios on various mortgage loans, it's crucial to remember that individual lenders set their own DTI criteria.

For those with a higher DTI, FHA loans might be the most accommodating, with some lenders allowing a DTI ratio as high as 57%. However, it's not unusual for lenders to cap this at 50% or even lower.

Conventional loans offer a bit less leeway, with the possibility of a DTI ratio up to 50% if the loan is manually underwritten by Fannie Mae. But you'll also need to bring a strong income and credit score.

VA loans are a mortgage reserved for veterans, service members, and qualified spouses. They are unique in that there's no official maximum DTI ratio. Lender preferences usually hover around a DTI ratio of 41% or less for approval. 

USDA loans become a potential option for homebuyers focused in rural locations. However, these loans are the most strict about DTI ratio requirements. Borrowers will likely need a DTI ratio of 41% or lower to get approved. 

How to get a loan with a high DTI ratio

Reduce your DTI ratio before applying

You can use free budgeting tools, like You Need a Budget or Empower's Personal Capital, to help you prioritize which debts to pay down first. 

However, remember that reducing monthly debt payments, not the total debt, is what will affect your DTI ratio. Simply reducing debts (such as car loans and personal loans) without fully clearing them may not change the ratio, notes David Naimey from Society Mortgage.

If you have high-interest debts, consider refinancing them. Doing so can reduce your monthly payments and save you on interest costs. Companies like Society Mortgage often provide free consultations to explore options for reducing your debts and DTI ratio.

Taking on a side job that matches your skills and interests can also boost your DTI ratio. Many lenders consider this extra income when calculating your DTI ratio. However, you must have worked the side job for at least one year for the income to be included in your ratio, according to Naimey. 

Boost your down payment savings

Minimum down payment requirements are just 3% for conventional loans and 3.5% for FHA. But you should aim to exceed the minimum down payment: It lowers the loan amount while signaling your commitment to financial stability.

Consider the 10-20% range as a target. This level of down payment can counterbalance a high DTI ratio, proving your ability to save and manage money effectively. Plus, it shrinks your monthly mortgage payment. 

Bonus: A 20% or larger down payment eliminates the need for private mortgage insurance (PMI), cutting your monthly expenses. 

» How to get a mortgage with low or no PMI

Apply with a co-signer or co-borrower

A co-signer with strong credit and a low DTI ratio could be a game-changer. They pledge to repay the loan if you can't keep up with payments.  

Timely repayments can positively impact both of your credit histories, but any missed payments could harm your credit scores. It's a partnership that demands trust and a clear understanding of the risks involved.

For an even stronger loan application, consider a co-borrower. Unlike a co-signer, a co-borrower owns the property and shares the payment responsibility with you.  

While co-borrowers are riskier than co-signers, they also present a more compelling case to lenders, potentially smoothing the path to your mortgage approval.

Hire a financial counselor

A certified financial counselor can tailor a debt management plan to lower your DTI ratio. They'll help you prioritize debts and utilize effective repayment techniques, such as the debt snowball method, which focuses on repaying your smaller debts first.  

For counseling services, consider non-profit resources such as the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America, government resources such as the U.S. Department of Housing and Urban Development (HUD), and local credit unions or community banks.

This article was reviewed by David Naimey, a loan officer at Society Mortgage.

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