Front‑End Debt‑to‑Income Ratio (DTI)

Key takeaways

• Front‑end DTI measures the percentage of your gross monthly income that goes to housing costs.
• Housing costs include mortgage principal and interest, property taxes, homeowners insurance, mortgage insurance, and HOA fees.
• Lenders commonly prefer a front‑end DTI of about 28% or less; back‑end DTI (all debts) is often expected to be 33–36%. Qualified mortgage guidelines commonly cap DTI around 43%.
• Lowering debt or increasing income improves your DTI and your chances of mortgage approval.

What it is

The front‑end debt‑to‑income ratio (front‑end DTI), also called the housing expense ratio or mortgage‑to‑income ratio, shows how much of your pre‑tax monthly income is committed to housing expenses. Lenders use it to assess whether a borrower can afford mortgage payments.

What counts as housing expenses

Housing expenses typically include:
* Mortgage principal and interest
* Property taxes
* Homeowners insurance
* Mortgage insurance (if applicable)
* Homeowners association (HOA) fees (if applicable)

How to calculate front‑end DTI

Formula:
Front‑End DTI = (Housing expenses ÷ Gross monthly income) × 100

Example:
* Monthly housing expenses: $1,700 (mortgage) + $100 (mortgage insurance) + $200 (homeowners insurance) + $200 (property tax) = $2,200
* Gross monthly income: $7,000
* Front‑end DTI = ($2,200 ÷ $7,000) × 100 = 31.4%

Front‑end DTI vs. Back‑end DTI

• Front‑end DTI: percentage of income spent on housing only.
• Back‑end DTI: percentage of income spent on all monthly debt obligations (housing + credit cards + car loans + student loans + alimony/child support + other debts). Lenders normally refer to back‑end DTI when they say “DTI.”

Typical lender targets:
* Front‑end: ~28% or less
* Back‑end: ~33–36%
* Qualified mortgage rules often allow up to ~43% in some cases

How lenders use front‑end DTI

Lenders combine DTI with credit score, assets, employment history, and savings to decide loan size and terms. A high front‑end DTI suggests housing costs may strain your budget and can reduce the mortgage amount you qualify for or increase your interest rate.

How to improve your DTI

• Pay down high‑interest revolving debt (credit cards).
• Reduce monthly housing costs (choose a lower‑priced home, lower interest rate, or different loan term).
• Increase gross income (overtime, side income, higher paying job).
• Save for a larger down payment to reduce the mortgage payment.
• Consider refinancing existing debt before applying for a mortgage.

Be cautious with co‑signers: they can help qualify you but share the payment responsibility and risk to both parties’ credit if payments are missed.

Special considerations

• Saving for a down payment and closing costs can compete with debt‑repayment goals, so prioritize based on your timeline and mortgage requirements.
• Different loan programs and lenders apply varying DTI thresholds and may weigh compensating factors (credit score, reserves, employment stability) differently.

Bottom line

Front‑end DTI is a simple, important measure of housing affordability: it shows how much of your gross monthly income would go toward housing expenses. Keeping it low — along with a reasonable back‑end DTI — improves your chances of mortgage approval and access to better loan terms.