What DTI Means and How It Works
Your debt-to-income ratio compares your total monthly debt payments to your gross monthly income. Fannie Mae uses this ratio to determine whether you can handle your mortgage payment along with your other financial obligations.
The calculation includes two parts: your total monthly obligations and your total monthly income. Your monthly obligations include your new mortgage payment (principal, interest, taxes, insurance, and HOA fees) plus all other recurring monthly debts.
Say you earn $8,000 per month and have a $400 car payment, $200 in credit card minimums, and your new mortgage payment will be $2,000. Your total monthly obligations would be $2,600, giving you a DTI of 32.5% ($2,600 ÷ $8,000).
Maximum DTI Limits by Loan Type
For manually underwritten loans, Fannie Mae sets the maximum DTI at 36%. However, you can qualify with a DTI up to 45% if you meet specific credit score and reserve requirements outlined in Fannie Mae's Eligibility Matrix.
If your loan goes through Desktop Underwriter (DU), the maximum allowable DTI jumps to 50%. DU evaluates your entire financial profile and may approve higher ratios based on compensating factors like high credit scores, significant assets, or stable employment history.
Certain loan types have different rules. Cash-out refinances may have lower DTI limits when processed through DU. High LTV refinances have no maximum DTI requirements except for loans under the Alternative Qualification Path.
What Counts as Monthly Debt
Fannie Mae includes specific types of debt in your DTI calculation. All installment debts and mortgage payments that extend beyond 10 months count toward your ratio. This includes car loans, student loans, personal loans, and other mortgages.
Revolving debts like credit cards count based on their minimum monthly payment. Lease payments count regardless of when the lease expires. Alimony, child support, and maintenance payments extending beyond 10 months also factor into the calculation.
Short-term debts that will be paid off within 10 months typically don't count, unless the payments would strain your ability to meet other credit obligations. For example, a large furniture payment ending in 8 months might still count if it represents a significant portion of your income.
Documents You'll Need
Your lender will verify all debts included in the DTI calculation. Expect to provide recent statements for all credit cards, showing current balances and minimum payments. You'll need loan statements or payment coupons for installment debts like car loans and student loans.
For mortgage debt on other properties, provide the most recent mortgage statement or a letter from your servicer showing the monthly payment amount. If you pay HOA fees, bring documentation of those monthly amounts.
Court orders or divorce decrees will be required to verify alimony, child support, or maintenance payments. For any lease agreements, provide the contract showing monthly payment amounts and terms.
Why These Rules Exist
Fannie Mae requires DTI limits because they predict your ability to repay the mortgage. Borrowers with higher DTI ratios have less financial cushion when unexpected expenses arise or income decreases.
The 36% limit for manual underwriting reflects conservative lending standards based on decades of loan performance data. The higher 50% limit for DU loans works because the automated system considers multiple risk factors simultaneously, not just DTI in isolation.
The 10-month rule for short-term debts recognizes that these payments will disappear soon, freeing up income for your mortgage payment. However, if these payments are large enough to affect your current ability to qualify, they still count.
Common Problems and Gotchas
Undisclosed debts discovered during the loan process can derail your closing. If new debts push your DTI above tolerance limits, the lender must re-underwrite your entire loan. This means submitting updated information to DU or performing a complete manual review.
The tolerance for DTI changes varies, but any increase that materially affects your qualification triggers re-underwriting. New subordinate financing on your property always requires re-underwriting, regardless of the DTI impact.
Credit card balances can fluctuate between application and closing. If you run up new charges that increase your minimum payments, this could push your DTI over the limit. Keep credit card usage stable throughout the loan process.
Some borrowers try to pay off debts just before closing to improve their DTI. While this can work, the payoff must be properly documented and the lender must verify the debt is actually eliminated. Simply promising to pay off debt at closing doesn't count.
Special Situations and Exceptions
Non-occupant co-borrowers face stricter DTI limits. The occupying borrower's DTI cannot exceed 45% for manually underwritten loans, even if the non-occupant borrower has excellent credit.
Borrowers without credit scores face additional restrictions. Manual underwriting may require lower DTI ratios for these applicants, as outlined in [[B3-5.4-01]].
Government loans (FHA, VA, USDA) follow their respective agency guidelines, which may differ from Fannie Mae's requirements. Your lender will apply the appropriate standards based on your loan type.
Investment properties and second homes have different DTI calculations. The lender uses the actual mortgage payment rather than the PITIA calculation used for primary residences, as detailed in [[B3-6-05]].
Re-underwriting Requirements
Lenders must have systems to catch changes in your financial situation throughout the loan process. If you disclose new debts or reduced income after initial approval, the lender must recalculate your DTI and determine if re-underwriting is required.
The final loan application you sign at closing must reflect all income and debts verified during the mortgage process. Any material changes discovered up to and including closing day can trigger a complete loan review.
For DU loans, re-underwriting means submitting updated information through the automated system. Manual loans require a comprehensive risk assessment with the new financial information. This process can delay closing and may result in loan denial if the new DTI exceeds allowable limits.
References
For the official guidelines, see B3-6-02: Debt-to-Income Ratios in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B3-6-02, Debt-to-Income Ratios (04/02/2025)
Calculating Total Monthly Obligation
DTI Ratio Tolerance and Re-Underwriting Criteria
DTI Ratios
The DTI ratio consists of two components:
total monthly obligations, which includes the qualifying payment for the subject mortgage loan and other long-term and significant short-term monthly debts (see Calculating Total Monthly Obligation below); and
total monthly income of all borrowers, to the extent the income is used to qualify for the mortgage (see Chapter B3–3, Income Assessment).
Maximum DTI Ratios
For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix.
For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%.
See B3-1-01, Comprehensive Risk Assessment for information about the DTI.
Exceptions to the Maximum DTI Ratio
Fannie Mae makes exceptions to the maximum allowable DTI ratios for particular mortgage transactions, including:
cash-out refinance transactions — the maximum ratio may be lower for loan casefiles underwritten through DU (see B2-1.3-03, Cash-Out Refinance Transactions);
high LTV refinance transactions - except for loans underwritten under the Alternative Qualification Path, there are no maximum DTI ratio requirements (see B5-7-01, High LTV Refinance Loan and Borrower Eligibility);
borrowers who do not have a credit score — the maximum ratio may be lower for manually underwritten loans (see B3-5.4-01, Eligibility Requirements for Loans with Nontraditional Credit);
non-occupant borrowers — the maximum ratio is lower than 45% for the occupying borrower for manually underwritten loans (see B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction); and
government mortgage loans — lenders must follow the requirements for the respective government agency.
Calculating Total Monthly Obligation
The total monthly obligation is the sum of the following:
the housing payment for each borrower’s principal residence
if the subject loan is the borrower’s principal residence, use the PITIA and qualifying payment amount (see B3-6-03, Monthly Housing Expense for the Subject Property);
if there is a non-occupant borrower, use the mortgage payment (including HOA fees and subordinate lien payments) or rental payments (see B3-6-05, Monthly Debt Obligations);
if the subject loan is a second home or investment property, use the mortgage payment (including HOA fees and subordinate lien payments) or rental payments (see B3-6-05, Monthly Debt Obligations;
if the subject loan is the borrower’s principal residence, use the PITIA and qualifying payment amount (see
the qualifying payment amount if the subject loan is for a second home or investment property (see B3-6-04, Qualifying Payment Requirements);
monthly payments on installment debts and other mortgage debts that extend beyond ten months;
monthly payments on installment debts and other mortgage debts that extend ten months or less if the payments significantly affect the borrower’s ability to meet credit obligations;
monthly payments on installment debts secured by virtual currency;
monthly payments on revolving debts;
monthly payments on lease agreements, regardless of the expiration date of the lease;
monthly alimony, child support, or maintenance payments that extend beyond ten months (alimony (but not child support or maintenance) may instead be deducted from income, (see B3-6-05, Monthly Debt Obligations);
monthly payments for other recurring monthly obligations; and
any net loss from a rental property.
Note: Fannie Mae acknowledges that lenders may sometimes apply a more conservative approach when qualifying borrowers. This is acceptable as long as Fannie Mae’s minimum requirements are met, and lenders consistently apply the same approach to similar loans. For example, a lender might calculate a higher minimum payment on a credit card account than what Fannie Mae requires, which is acceptable as long as the lender consistently applies this calculation to all mortgage applications with revolving debts.
DTI Ratio Tolerance and Re-Underwriting Criteria
Fannie Mae expects lenders to have in place processes to facilitate borrower disclosure of changes in financial circumstances throughout the origination process and prefunding quality control processes to increase the likelihood of discovering material undisclosed debts or reduced income. See D1-2-01, Lender Prefunding Quality Control Review Process.
As a result of the lender's normal processes and controls, the lender may need to re-underwrite the loan after initial underwriting. If the borrower discloses or the lender discovers additional debt(s) or reduced income after the underwriting decision was made up to and concurrent with loan closing, the loan must be re-underwritten if the new information causes the DTI ratio to increase by more than the allowed tolerances.
In all cases, if the lender determines that there is new subordinate financing on the subject property during the loan process, the mortgage loan must be re-underwritten.
Note: Re-underwriting means that loan casefiles must be resubmitted to DU with updated information; and for manually underwritten loans, a comprehensive risk and eligibility assessment must be performed.
Applying the Re-underwriting Criteria
The following steps are required if the borrower discloses or the lender discovers additional debt(s) or reduced income after the underwriting decision was made up to and concurrent with loan closing:
1
The lender must document the additional debt(s) and reduced income in accordance with
2
If there is new subordinate debt on the subject property, the mortgage loan must be re-underwritten.
3
The lender must recalculate the DTI ratio. For DU loan casefiles, the DTI ratio should be recalculated outside of DU.
4
5
The final loan application signed by the borrower must include all income and debts verified, disclosed, or identified during the mortgage process.
6
Upon delivery to Fannie Mae, the lender must deliver the qualifying monthly income and expense amounts that are on the final loan application. See
