What DTI means
Your debt-to-income ratio is your monthly debts, including the new house payment, divided by your monthly income before taxes. Lenders often look at two numbers: the housing payment alone (front end) and everything together (back end). In Texas, property taxes and homeowners insurance are a big part of the housing payment, so they move this ratio more than many buyers expect.
Limits by loan type
- FHA, automated approval. What the agency says: No single published cap. HUD's TOTAL scorecard can approve ratios above manual limits when the rest of the file is strong.
- FHA, manual underwriting. What the agency says: 31/43 with no compensating factors. 37/47 with one factor. 40/40 with no discretionary debt. 40/50 with two factors. Scores under 580 or no score are held to 31/43 (HUD 4000.1 II.A.5.d.viii).
- Conventional (Fannie Mae). What the agency says: 36% for manual underwriting, up to 45% with credit score and reserve requirements met. Up to 50% for loans run through Desktop Underwriter (Fannie Mae B3-6-02).
- Conventional (Freddie Mac). What the agency says: Loan Product Advisor assesses the ratio on automated approvals. On manual files, over 45% isn't eligible, and above 36% needs documented justification (Freddie Mac Guide 5401.2).
- VA. What the agency says: 41% is a guide, not a hard cap. Above it, the lender has to justify the file, and residual income (what's left after major expenses, based on family size and region) carries a lot of weight (VA Pamphlet 26-7, Ch. 4).
- USDA. What the agency says: 29% housing and 41% total are the standard ratios (7 CFR 3555.151(h)(1)(i)).
These are agency rules, and they're the limits we use. Some lenders set lower limits (an overlay). Down payment programs can add their own caps: TDHCA's My First Texas Home follows the automated findings but caps manually underwritten FHA, VA and USDA files at 45% (TDHCA program matrix), and TSAHC allows manually underwritten FHA up to 43% with a 640 score (TSAHC lender programs). And an underwriter still has to approve the whole file.
What FHA counts as compensating factors on a manual file
HUD spells these out (HUD 4000.1 II.A.5.d.ix):
- Cash reserves after closing equal to at least three months of the total mortgage payment (one or two units), not counting gifts or borrowed money.
- A small payment increase: the new payment is no more than the lesser of $100 or 5% above what you pay now, with a clean 12-month housing history.
- No discretionary debt: your housing payment is your only balance you don't pay off every month, with at least six months of history showing it.
- Residual income that meets VA's tables.
- Significant extra income (like overtime) that isn't counted, but only in combination with another factor.
Which debts count, and which may not
- Debts on your credit report with a monthly payment generally count. On conventional loans, an installment loan with ten or fewer payments left can generally be left out (Fannie Mae B3-6-05; Freddie Mac 5401.2).
- Student loans count even if deferred. FHA uses 0.5% of the balance when the payment shows $0. Fannie Mae can use a documented $0 income-driven payment. Freddie Mac uses 0.5% of the balance when the report shows $0, unless a different payment above zero is documented. VA uses 5% of the balance divided by 12 unless the loan is deferred at least 12 months past closing or a higher payment is reported. See student loans.
- Debts someone else pays can sometimes be excluded on conventional loans with 12 months of proof that the other person made the payments.
- Texas spouse debts: on FHA, VA and USDA, a non-borrowing spouse's debts count in Texas unless state law excludes them (HUD 4000.1 II.A.4.b.iv(F)). Conventional generally counts only the debts of the people on the loan.
Fictional example
This example is made up to show how the rules work.
Ray in Benbrook works in hospital billing. His back-end ratio came out around 49% with his car loan, two cards and a student loan. The automated FHA system didn't approve it. On a manual review, 49% fits only the 40/50 tier, which needs two compensating factors. He had about four months of reserves after closing, and his new payment would be close to his current rent, but more than $100 higher, so that second factor didn't count. He paid off one card at closing, which brought his ratio under 47% and into the one-factor tier, where his reserves were enough to present the file. Underwriting made the final call.
What to do next
- List every monthly payment you have, including anything your spouse owes if you're married.
- Don't take on new debt, even a small one, before closing.
- Ask which debts could be paid down or documented out, and whether a different program treats your situation better.
Next step
Send me your debts and income and I'll show which ones actually count. Book a call
Related questions
Sources
Links checked Oct 19, 2026.
- HUD Handbook 4000.1 (Update 18), II.A.5.d.viii and ix, II.A.4.b.iv(F), Student Loans: https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf
- Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios: https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios
- Fannie Mae Selling Guide B3-6-05, Monthly Debt Obligations: https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
- Freddie Mac Seller/Servicer Guide 5401.2, Monthly debt payment-to-income ratio: https://guide.freddiemac.com/app/guide/section/5401.2
- TSAHC lender program summary: https://www.tsahc.org/lenders-realtors/tsahc-homebuyer-programs/
- VA Lenders Handbook, VA Pamphlet 26-7, Chapter 4 (Credit Underwriting), on KnowVA: https://www.knowva.ebenefits.va.gov/system/templates/selfservice/va_ssnew/help/customer/locale/en-US/portal/554400000001018/content/554400000330850/VA-Pamphlet-VAP26-7-Chapter-04-Credit-Underwriting
- VA Circular 26-17-02 (student loans; rule carried in VA Pamphlet 26-7, Chapter 4): https://benefits.va.gov/HOMELOANS/documents/circulars/26_17_2.pdf
- 7 CFR 3555.151(h)(1), USDA repayment ratios: https://www.ecfr.gov/current/title-7/section-3555.151
- TDHCA My First Texas Home program matrix: https://welcomehome.tdhca.texas.gov/uploads/My-First-Texas-Home-Program-Matrix-TMS.pdf
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026