What debt-to-income ratio measures
and why it caps what you can borrow.

Debt-to-income ratio is one division. Add up what you owe every month across your debts, divide by your gross monthly income, and write it as a percentage. Lenders use it to answer a narrow question: on top of everything you are already paying, can you carry a mortgage payment as well.

The part that surprises people is that DTI counts the payment, not the balance. A car loan with 4,000 left on it and a 550 monthly payment costs you more room in the ratio than a much larger balance being paid off slowly. It is also gross income, before tax, which is not the number most people have in their head when they think about what they can afford. Both of those are why a pre-approval can land well under what a buyer expected.

Say someone grosses 8,000 a month and carries 1,200 in existing monthly payments across a car and student loans. Before any mortgage, they are already at 15%. If a lender is working to a cap around 43%, that leaves roughly 2,200 a month for the housing payment, and the housing payment includes taxes and insurance, not just principal and interest. Those figures are an illustration to show the shape of the arithmetic, not a quote and not a number for any particular borrower.

Most conventional lenders cap DTI somewhere around 43% to 45%, and FHA allows up to 57% in some cases. Those are common practice rather than fixed lines, and where a specific lender lands depends on the rest of the file, including credit and reserves.

What to ask, and who answers it: your lender is the only one who can calculate your actual DTI, tell you what cap applies to your file, and say whether clearing a particular debt before you apply would change what you qualify for. Your agent can tell you what the resulting number buys in the towns you are looking at. Nothing here is a quote or a commitment from anyone.