What is a debt-to-income ratio? | Consumer Financial Protection Bureau (2024)

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What is a debt-to-income ratio? | Consumer Financial Protection Bureau (2024)


What is a debt-to-income ratio? | Consumer Financial Protection Bureau? ›

Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.

What is the debt-to-income ratio for CFPB? ›

Consider maintaining a debt-to- income ratio for all debts of 36 percent or less. Some lenders will go up to 43 percent or higher. Your home mortgage is included in this ratio. Consider maintaining a debt-to- income ratio for all debts of 15-20 percent or less.

What is the consumer debt-to-income ratio? ›

Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it's the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt.

What is an acceptable debt-to-income ratio? ›

35% or less: Looking Good - Relative to your income, your debt is at a manageable level. You most likely have money left over for saving or spending after you've paid your bills. Lenders generally view a lower DTI as favorable.

What is the debt-to-income ratio for USDA loan? ›

USDA Loan Eligibility

A minimum credit score of around 620 (credit score requirements might vary per borrower) A debt-to-income (DTI) ratio of 41% or less.

What is a good debt-to-income ratio Ramsey? ›

Lenders often use the 28/36 rule as a sign of a healthy DTI—meaning you won't spend more than 28% of your gross monthly income on mortgage payments and no more than 36% of your income on total debt payments (including a mortgage, student loans, car loans and credit card debt).

What is the highest debt-to-income ratio? ›

Most conventional loans allow for a DTI ratio of no more than 45 percent, but some lenders will accept ratios as high as 50 percent if the borrower has compensating factors, such as a savings account with a balance equal to six months' worth of housing expenses.

Is a 7% debt-to-income ratio good? ›

DTI is one factor that can help lenders decide whether you can repay the money you have borrowed or take on more debt. A good debt-to-income ratio is below 43%, and many lenders prefer 36% or below. Learn more about how debt-to-income ratio is calculated and how you can improve yours.

Is 20% debt-to-income ratio good? ›

To get the ratio as a percentage, you would then multiply 0.5 x 100 = 50%. Your DTI would be 50%. The ideal DTI varies by lender, type of loan and loan size. Generally, a DTI of 20% or less is considered low and at or below 43% is the rule of thumb for getting a qualified mortgage, according to the CFPB.

Is 11% debt-to-income ratio good? ›

10% or less: Shouldn't have trouble getting loans. May qualify for lower rates. 11% to 20%: Again, shouldn't have trouble getting loans. Time to scale back on spending.

Does rent count in debt-to-income ratio? ›

These are some examples of payments included in debt-to-income: Monthly mortgage payments (or rent) Monthly expense for real estate taxes.

Are utilities included in the debt-to-income ratio? ›

Monthly Payments Not Included in the Debt-to-Income Formula

Many of your monthly bills aren't included in your debt-to-income ratio because they're not debts. These typically include common household expenses such as: Utilities (garbage, electricity, cell phone/landline, gas, water) Cable and internet.

What does my debt-to-income ratio need to be to buy a house? ›

Backed by the federal government, Federal Housing Administration loans offer financing assistance to homebuyers with lower credit scores or smaller down payments. Most borrowers need a DTI of 43% or less to qualify for an FHA loan.

What is the highest debt-to-income ratio for FHA? ›

Borrowers must have a minimum credit score of 580 to qualify for the loan. The maximum DTI for FHA loans is 57%. However, a lender can set their own requirement.

What is the maximum debt ratio for USDA? ›

USDA Loan Approval

The standard debt to income (DTI) ratios for the USDA home loan are 29%/41% of the gross monthly income of the applicants. The maximum DTI on a USDA loan is 34%/46% of the gross monthly income.

What debt-to-income ratio is house poor? ›

Therefore, a more precise way to determine how much you should spend would be to calculate what percent of your monthly gross income will be spent on housing costs. This is referred to as the "debt-to-income" ratio, or front-end DTI. The rule of thumb is that this number should be no more than 28%.

What percentage does the consumer financial protection bureau cfpb recommend a debt-to-income ratio of no more than? ›

Section 1026.43(e)(2)(vi) provides that, to satisfy the requirements for a qualified mortgage under § 1026.43(e)(2), the ratio of the consumer's total monthly debt payments to total monthly income at the time of consummation cannot exceed 43 percent.

What percentage of gross salary does CFPB take? ›

To maintain a low student loan repayment burden, the Consumer Financial Protection Bureau suggests student loan payments should not exceed 8% of your gross salary.

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