Your debt-to-income ratio for a mortgage is your total monthly debt payments, including the new house payment, divided by your gross monthly income. Lenders use it to judge whether a loan fits your budget, and the cap depends on the loan type and your overall file. For a conventional loan approved through Fannie Mae’s automated system, the ceiling is 50%, and the sections below show how the math works on a Houston-priced home.
Rate context: Freddie Mac’s weekly survey put the 30-year fixed average at 7.40% for the week of October 15, 2026. Figures below use that rate, and they are illustrations, not quotes. I track the weekly number on my Houston mortgage rates page.
How is the debt-to-income ratio for a mortgage calculated?
The Consumer Financial Protection Bureau describes it as monthly debt payments divided by gross monthly income, meaning income before taxes. On the debt side, lenders add the full proposed housing payment (principal, interest, property taxes, homeowners insurance, and any mortgage insurance or HOA dues) plus car loans, student loans, credit card minimums, and support payments. Groceries, utilities, and phone bills do not count.
A $340,000 Houston example
Take a $340,000 home, close to the Houston median, with 5% down. The loan is $323,000, and at 7.40% the principal and interest payment is about $2,236. Add roughly $950 a month for taxes and insurance (Houston tax bills vary a lot by MUD and school district) and the housing payment is about $3,186, before any mortgage insurance. Now add a $450 car payment, a $250 student loan, and $100 in card minimums: $3,986 a month in total debt.
- At $7,500 of gross monthly income, the ratio is 53.2%, over Fannie Mae’s 50% ceiling.
- At $9,000 of gross monthly income, it is 44.3%, workable for some loans.
- At $10,500 of gross monthly income, it is 38.0%, comfortable.
The car loan matters most here. At $9,000 of income, paying it off before you apply drops the ratio from 44.3% to 39.3%. Ask your lender before you pay off, open, or close any account, because timing and credit effects matter.
What debt-to-income ratio do lenders allow?
Fannie Mae’s Selling Guide (topic B3-6-02, April 2025 update) sets the maximum total ratio at 36% for manually underwritten loans, which can stretch to 45% with the required credit score and reserves. Loans run through its automated system, Desktop Underwriter, can go to 50%. FHA and VA loans follow their own guidelines and often allow higher ratios when other parts of the file are strong. Because each program, lender, and automated finding differs, ask your lender for the number that applies to your loan.
How to lower your ratio before you apply
There are only two levers: smaller monthly debts or larger documented income. Paying down a revolving balance, paying off a short installment loan, or choosing a lower price all shrink the top of the fraction. Documenting a second earner, overtime history, or a raise grows the bottom. A larger down payment helps a little by trimming the loan payment, and a rate buydown can too. If you are still learning where you stand, my post on pre-qualification versus pre-approval explains the step where a lender checks these numbers, and the underwriting timeline shows when they get checked again.
How I work with buyers on the numbers
Before we write an offer, I ask my buyers to get a lender’s written approval and then work backward from the payment they are comfortable with, not the maximum the ratio allows. A buyer who stretches to 50% has little room left for a roof or an insurance increase. If you want a way to judge any real estate agent you interview, I list the questions in how to choose a Realtor.
Frequently asked questions
What is a good debt-to-income ratio for a mortgage?
Lower leaves you more room. Fannie Mae’s 36% manual-underwriting limit is a sensible comfort mark, though approvals above it are common when credit, reserves, and down payment are strong. The right number for you is the payment you can carry comfortably.
Does the debt-to-income ratio include my rent?
No. Rent is replaced by the new housing payment in the calculation, so your current rent is not counted once you buy.
Do utilities and groceries count as debts?
No. Only recurring debt obligations, such as loans, minimum card payments, and support payments, are counted, plus the new housing payment.
Is gross or net income used?
Gross income, meaning before taxes and deductions, according to the CFPB.
Can I get a mortgage with a ratio above 43%?
Often yes. Fannie Mae’s automated system allows up to 50%, and FHA and VA have their own rules. Whether you qualify depends on the rest of your file, so ask a lender about your loan.
Do I need a real estate agent before I talk to a lender?
No, but talking to a real estate broker early helps you set a price range that matches the payment you want. If you hire one, the compensation is set out in a written buyer representation agreement before showings begin.
Buying in Houston and haven’t hired a real estate agent yet?
Talk with me before you sign a buyer representation agreement with anyone. Working backward from the payment you want to a price range is part of how I work every purchase, from Cypress to Katy. There’s no pressure and no obligation. Call or text (281) 500-7077, email kevan@houstonprimerealty.com, or start on my Mortgage Information page. If you are already working with another real estate agent, that real estate agent is the right person to take this post to.
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Kevan Pewitt · REALTOR® & Broker · Houston Prime Realty
I’m a real estate broker, not a lender; figures are illustrative, not a loan offer or legal or lending advice. Sources: Freddie Mac Primary Mortgage Market Survey (Oct 15, 2026), CFPB, Fannie Mae Selling Guide B3-6-02. Last updated: October 2026
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