What debt-to-income ratio means
Your debt-to-income ratio (DTI) plays a large role in how much a lender will let you borrow. It’s your monthly debt payments divided by your gross monthly income: what you earn before taxes and other deductions come out. The Consumer Financial Protection Bureau (CFPB) gives this example: a $1,500 mortgage payment, a $100 car loan and $400 of other debts add up to $2,000 a month. On $6,000 a month of income, that’s a DTI of 33%.
Two versions of the ratio matter when you buy a home:
- The housing ratio counts only the full housing payment: principal, interest, property tax, homeowners insurance, plus PMI and HOA dues if you have them.
- The total ratio adds every other debt payment: car and student loans, credit card minimums, child support. Utilities, phone bills and groceries aren’t debts, so they don’t count.
The limits this calculator uses
28/36 for a comfortable price. Fannie Mae’s homebuyer glossary describes the 28/36 rule as a guideline: up to 28% of gross income on housing and up to 36% on all debts. It’s a rule of thumb, not a law, and lenders don’t have to follow it. Fannie Mae’s homebuyer guide also says a DTI of 36% or less is considered good.
43% for a stretch. The CFPB’s rule for a standard “qualified mortgage” (a loan that meets federal rules showing the lender checked you can repay) used to cap DTI at 43%. In December 2020 the CFPB replaced that cap with a test based on the loan’s price, and lenders had to switch by October 1, 2022. They must still consider your DTI or the income you’d have left over. 43% is still a common reference point, but it’s no longer a legal limit.
What lenders allow today. Fannie Mae, which buys mortgages from lenders, sets a 36% maximum DTI for loans a person underwrites by hand, up to 45% for borrowers who meet its credit score and savings requirements, and up to 50% through its automated system (Selling Guide, checked October 2026). Other loan types and lenders set their own limits.
Worked example
Say you earn $100,000 a year before tax, pay $500 a month on a car loan and other debts, and plan to put 10% down on a 30-year mortgage at 6.5%.
- Gross monthly income: $100,000 ÷ 12 = $8,333.
- Housing limit: 28% of that is $2,333 a month for the full housing payment.
- Total debt limit: 36% is $3,000 for all debts. Take off the $500 you already pay and $2,500 is left for housing.
- The smaller budget wins: $2,333 a month. The calculator then finds the highest price whose full payment fits it: $318,095.
At that price, the $2,333 monthly payment is made up of:
- principal and interest on a $286,286 loan: $1,810
- property tax at 0.89% of the price: $236
- homeowners insurance: $145
- PMI, because the down payment is under 20%: $143
At a 43% stretch limit, $3,083 a month is left for housing after the other debts, and the price could reach $427,102. That’s $109,007 more home for $750 more a month.
On $100,000 a year before tax with $500 a month of other debts, a home up to about $318,095 keeps the full housing payment, $2,333 a month, within 28% of your gross income and all debt payments within 36%. Here the 28% housing limit sets the price; your other debts leave room under the total debt limit. At the 43% stretch limit, the price could reach $427,102, with a payment of $3,083 a month.
How much house you can afford on $50,000 to $150,000 a year
Comfortable (28/36) and stretch (43%) prices from the calculator, with $500 a month of other debts, 10% down, a 30-year loan at 6.5%, and the default tax and insurance. The full monthly payment is under each price.
| Yearly income | Comfortable | Stretch |
|---|---|---|
| $50,000 | $124,304$1,000 a month | $166,696$1,292 a month |
| $75,000 | $233,311$1,750 a month | $296,899$2,187 a month |
| $100,000 | $318,095$2,333 a month | $427,102$3,083 a month |
| $150,000 | $487,661$3,500 a month | $687,508$4,875 a month |
At $50,000, the 36% total debt limit sets the comfortable price, because $500 a month of other debts is a bigger share of a smaller income. At the higher incomes, the 28% housing limit sets it.
What else lenders look at
DTI is one part of the decision. Federal rules require lenders to weigh your income or assets, your job, your existing debts and your credit history as well, and a higher credit score usually means a lower rate. Our guide to what counts as a good credit score explains how scores work.
You also need cash for closing on top of the down payment. The CFPB lists common closing costs such as appraisal fees, title insurance, government taxes, and prepaid property tax, insurance and interest. Some lenders also want reserves: savings left over after closing. Fannie Mae requires them for some borrowers above 36%.
Common mistakes
- Using take-home pay. The ratios use gross income. After taxes and retirement savings, the same payment takes a bigger share of what actually reaches your account.
- Counting only the loan payment. Property tax, insurance and PMI can add several hundred dollars a month. The calculator includes them; the mortgage calculator shows the full payment for a specific home, year by year.
- Treating the stretch price as the target. It’s close to what a lender may approve, which says little about what’s left for everything else you pay for. Our post on being house poor shows where that leads.
- Spending every dollar on the down payment. Closing costs, moving and early repairs come next, and an emergency fund matters as much after buying as before.
- Forgetting costs outside the ratio. Maintenance, utilities and commuting don’t count toward DTI, but they come out of the same paycheck. Our guide for first-time homebuyers covers them.