Debt-to-Income Ratio (DTI) for an FHA Loan: What’s the Max?

Written by Steven PorrelloSeptember 14th, 20224 minute read

Jump to section: FHA loan DTI calculator | Income and debt for FHA loan | Compensating factors | FHA loan DTI chart | How to lower your DTI

The max debt-to-income ratio for an FHA loan is 43%. In other words, your total monthly debts (including future monthly mortgage payments) shouldn’t exceed 43% of your pre-tax monthly income if you want to qualify for an FHA loan.

That said, your FHA lender may approve a higher DTI for your FHA loan if you have certain financial strengths (called “compensating factors”) that offset your risk. With compensating factors, the absolute maximum DTI for an FHA loan is 50%. Below the DTI calculator for an FHA loan, we’ll discuss what goes into your debt-to-income ratio, what compensating factors permit a higher DTI, and how to lower your debt-to-income ratio naturally.

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FHA loan debt-to-income (DTI) calculator

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What income and debt is used to calculate DTI for an FHA loan?

Income for FHA loan

Your FHA lender wants your gross monthly income, which is how much you earn before taxes and other deductions are taken out. The following types of income can be used in your debt-to-income ratio for an FHA loan:

  • Wages from an employer
  • Self-employment or small business income
  • Rental income
  • Alimony and child support
  • Disability income
  • 401(k), social security, or other pensions

🔍 What’s the difference between front-end and back-end DTI ratios? Front-end ratios measure your housing expenses against your monthly income. Back-end ratios, on the other hand, measure all your debt against your income. For FHA loans, your front-end ratio should be between 31% and 40%, whereas your back-end ratio cannot exceed 43%. Learn more about debt-to-income ratios.

Debt for FHA loan

Your debts are recurring monthly payments, like rent, car loans, and credit cards. These are minimum payments, not account balances or principals (student loans are different; we’ll discuss those below). So if you owe $5,000 on a personal loan but your minimum monthly payment is $250, then you’d use the $250 as debt in your DTI ratio. The FHA considers the following as debts:

  • Rent or monthly mortgage payments
  • Student loans
  • Car and personal loans
  • Credit cards and other revolving lines of credit
  • Child support or alimony

The FHA doesn’t consider monthly utility bills, food costs, transportation, insurance premiums, retirement contributions, or savings contributions as “debts,” even if they are recurring.

🎒 How are student loan payments calculated? The FHA will use the monthly payment that shows up on your credit report, unless you can prove that you’re currently paying less than that amount. If you’ve deferred your payments, the FHA will use 0.5% of your outstanding balance.

How to get approved with a higher DTI on an FHA loan: compensating factors

“Compensating factors” are financial strengths that can be used to offset a higher DTI for an FHA loan. With two or more compensating factors, the maximum DTI is 50%. Aside from opting for a cosigner on your FHA loan, the following are the most common compensating factors for an individual applying for an FHA loan:

  • Significant cash reserves: Your lender may approve a high DTI if you have at least three months worth of mortgage payments in a savings account. This should be liquid cash, which is money you can withdraw easily (not investments or equity). You can also count gifts, cash received at closing, and withdrawals from retirement accounts (as long as the withdrawal isn’t more than 60% of your retirement savings).
  • Low monthly expenses: If your expenses are lower, you’ll have “residual income.” This is pretax income that’s left over after you cover your basic expenses like utilities, food, transportation, clothing, and insurance premiums. In this case, your debts may take a significant part of your income. But because your monthly expenses are low, you’re less likely to default on a mortgage.
  • Minimum increase in housing expenses: If your new mortgage payment doesn’t add more than $100 to your current housing expenses, you might qualify with a higher DTI. You just need to show that you’ve paid your housing payments on time in the last 12 months with no more than one 30-day late payment.
  • No discretionary debts: Borrowers who don’t owe money on revolving debt (like credit cards and credit lines) may get away with a higher DTI.
  • High credit score: The lowest credit score you can have on an FHA loan is 580. For credit scores that are exceedingly high (670 or above), your lender may permit a higher DTI.
  • Sources of income that aren’t included in your DTI ratio: This could include bonuses, overtime pay, seasonal employment, part-time work, or food stamps. Having this additional income as a resource could help you qualify for an FHA loan with a higher DTI.

FHA loan debt-to-income ratio chart

The compensating factors listed above can help you get an FHA loan only if your credit score is above 580 and your DTI is below a certain threshold. The following chart will help you figure out how many compensating factors you need for your specific DTI (both front-end and back-end).

If your credit score is…
And you have a DTI that’s under…
You need this many compensating factors to get an FHA loan…
500–579 (or no credit score)
Front-end: 31%
Back-end: 43%
Zero. In this case, you must have a DTI that’s under 43%.
580 and above
Front-end: 31%
Back-end: 43%
Zero. In this case, you meet the requirements and you don’t need compensating factors.
580 and above
Front-end: 37%
Back-end: 47%
One compensating factor, which can be:
  • Verified and documented cash reserves
  • Minimal increase in housing expenses
  • Low monthly expenses (residual income)
580 and above
Front-end: 40%
Back-end: 40%
One compensating factor, which can be:
  • No discretionary debt
580 and above
Front-end: 40%
Back-end: 50%
Two compensating factors, which can be:
  • Verified and documented cash reserves
  • Minimal increase in housing expenses
  • Low monthly expenses (residual income)
  • Sources of income not included in your DTI ratio

Other ways to lower your DTI for an FHA loan

Increase your income

Lenders want to see a steady flow of income, whether that’s from full-time work or side hustles. If you can pick up a part-time job or a side gig, you could drastically bring down your DTI.

Pay off your highest monthly debt

Since your DTI is based on monthly debt, paying off credit cards and loans with the highest monthly payments could lower your ratio. If you can’t pay more than the minimum, you could negotiate a lower interest rate or ask for a longer loan term with your lender. Both of these could bring down your monthly payments.

Use a balance transfer to lower monthly debts

You may qualify for a balance transfer credit card, which could reduce your monthly payments. These cards typically come with an introductory 0% interest rate that lasts for a year or longer. During this time, you won’t pay interest, only principal. Just be careful—after the introductory period ends, you’ll pay interest again at a higher rate.

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