What is a good debt-to-income ratio for a mortgage?

For many homebuyers, getting approved for a mortgage can feel overwhelming. Beyond your credit score and employment history, one of the most important factors lenders review is your debt-to-income ratio, or DTI. Understanding your DTI, how it’s calculated, and how it influences your loan approval can help you approach homeownership with confidence.

Your DTI reflects the percentage of your income that goes toward paying monthly debts. The lower your DTI, the more comfortable a lender feels that you can manage your future mortgage payment along with your existing obligations. In most cases, a DTI of 36% or lower is considered ideal. This signals to lenders that you have a healthy balance between income and debt, giving you a stronger chance of approval and potentially better loan terms.

So what exactly goes into your DTI? Lenders add up your recurring monthly debts, such as car payments, credit cards, personal loans, student loans, and any other mortgages you may have. Obligations like child support or alimony are included as well. On the income side, they look at your gross monthly income — meaning your total earnings before taxes — which can include salary, wages, commissions, bonuses, rental income, and certain other verifiable sources.

Utilities, insurance premiums, groceries, and everyday living expenses aren’t counted in DTI calculations, since lenders focus only on fixed debt payments you’re legally obligated to make each month.

Lenders pay close attention to your DTI because it helps them assess risk. A borrower already stretched thin with debt may struggle to take on additional financial responsibility, particularly if unexpected expenses arise. On the other hand, a lower DTI shows you have enough income cushion to comfortably afford new obligations.

While 36% or lower is often considered the target, many loan programs allow higher ratios. FHA loans, for example, may allow DTIs up to 43% or even 50% in certain situations. Fannie Mae and Freddie Mac allow ratios up to 50% for borrowers with strong credit scores and other compensating factors. VA loans typically allow a DTI up to 41%, but lenders can still approve higher ratios based on a borrower’s full financial profile.

If your DTI is higher than you’d like, you’re not out of options. Some borrowers work to reduce debt before applying, while others explore loan programs designed to accommodate higher ratios. Paying down credit cards, consolidating personal loans, or temporarily postponing large purchases can help lower your DTI and improve your approval odds. In some cases, adding a co-borrower or showing additional verifiable income may also help strengthen your application.

While DTI plays a major role, it’s only one piece of your full financial picture. Lenders also consider your credit history, employment stability, savings, and down payment. But managing your debt responsibly and keeping your DTI in a healthy range puts you in a much stronger position when it’s time to apply for a mortgage.

At Pacific Direct Mortgage, we’ve worked with hundreds of buyers, investors, and real estate professionals across California to help navigate the mortgage process and find solutions that fit each borrower’s unique situation. Whether you’re just starting the process or exploring options with a higher DTI, we’re here to help you find the right path forward.