A high debt-to-income ratio still gets approved, most often on FHA. Debt-to-income ratio (DTI) is your house payment plus monthly debts, divided by gross monthly income before taxes, and FHA lets it run to 56.9%. When a ratio still comes in over the line, a co-signer, a payoff or a small change in price usually brings it back inside.
How high each program goes
| Program | Housing ratio | Total ratio | How it works |
|---|---|---|---|
| FHA | 46.9% | 56.9% | With an automated approval from FHA's TOTAL Scorecard |
| Conventional | No separate limit | 50% | Through Fannie Mae's Desktop Underwriter |
| VA | No separate limit | 41% guideline | Higher ratios approved when residual income is at least 20% above VA's table |
| USDA | 29% | 41% | An automated GUS Accept doesn't need a ratio waiver to go higher |
VA's residual income is the money left each month after taxes, debts, the house payment and an allowance for upkeep and utilities. VA's regulation sets 41% as the standard and says that when the ratio is above 41% and residual income beats the guideline by at least 20%, the extra review isn't required. A veteran with solid leftover income can be approved well past 41%.
A buyer over the line
Jesse earns $4,200 a month gross and has $700 a month in debts: a $460 car payment, $140 in card minimums and a $100 personal loan. Jesse wants a $260,000 single-family home with FHA 100% financing (a 96.5% FHA first plus a down payment assistance second covering the 3.5%).
| Line | Monthly |
|---|---|
| Base loan $250,900 plus 1.75% upfront MIP ($4,390.75), total $255,290.75 at 5.75% | $1,489.81 |
| Property tax at 0.95% a year | $205.83 |
| Homeowners insurance | $283.00 |
| Annual FHA mortgage insurance at 0.55% | $115.00 |
| House payment | $2,093.64 |
| Other debts | $700.00 |
| Total | $2,793.64 |
Housing ratio: $2,093.64 divided by $4,200 is 49.8%, above FHA's 46.9%. Total ratio: $2,793.64 divided by $4,200 is 66.5%, above 56.9%. On these numbers alone, Jesse's highest FHA price is about $202,000.
The fixes, with the math
Add a co-signer. Jesse's grandmother receives $1,400 a month in Social Security that isn't taxed. FHA lets the lender gross up non-taxable income by 15%, so it counts as $1,610. She owns her home free and clear, and the $250 a month she pays in property tax and insurance counts as her debt. Combined income is $5,810 and combined debts are $950.
- Housing ratio: $2,093.64 divided by $5,810 is 36.0%.
- Total ratio: $2,093.64 plus $950 is $3,043.64, divided by $5,810 is 52.4%.
Both ratios now sit inside FHA's limits, and the $260,000 home qualifies. With her on the loan, Jesse's FHA maximum rises to about $297,000. On FHA she's a non-occupant co-borrower: she doesn't go on the title and doesn't live in the home. The co-signer calculator runs this for your own family.
Pay off a debt. Paying the $140 in card minimums to zero drops Jesse's debts to $560, and the FHA maximum rises from about $202,000 to about $222,000. Each $100 a month removed is worth roughly $14,000 of FHA buying power at a 5.75% rate when total debt is the limit.
Use the program with the most room. The same debts that fail Conventional's 50% can pass FHA's 56.9%. Student loans, a car payment and cards often push a buyer toward FHA for exactly this reason.
Count every dollar of income. Overtime, bonuses or a second job with a history can count, and so can a spouse or partner who goes on the loan.
What doesn't count against you
Your current rent, utilities, phone, car insurance and groceries aren't debts for DTI on any program. Only the new house payment and the obligations on your credit report, plus items like child support, go into the ratio. A buyer who feels stretched by monthly bills can still have a DTI well inside FHA's limits, because most of those bills never enter the math.
The DTI calculator shows both ratios on FHA, Conventional, VA and USDA at once from your income and debts. If yours come back high, call AAA Capital Funding at 888-601-8344. We'll show you which debt to pay first, what a co-signer adds and which program gets you approved.