Debt-to-income ratio explained by lender type
Debt-to-income (DTI) ratio is the single most important underwriting metric outside your credit score. It's what tells a lender whether you can actually afford the loan payment on top of everything else. Every Loanplaced application runs DTI first, before anything else.
How DTI is calculated
DTI is the sum of your monthly debt payments divided by your monthly gross income, expressed as a percentage.
Monthly debt payments (including proposed new loan) ÷ Monthly gross income × 100 = DTI %
Included in "debt payments": minimum credit card payments, student loans, car loans, other personal loans, alimony, child support, mortgage or rent (front-end mortgage DTI includes housing; back-end includes everything).
Not included: utilities, groceries, insurance premiums (except mortgage-related), subscription services, savings contributions.
DTI limits by loan type at Loanplaced
| Loan type | Maximum DTI (typical) | Best pricing under |
|---|---|---|
| Personal loans | 45% | 36% |
| Conventional mortgage | 45% (up to 50% w/ compensating factors) | 36% (front-end 28%) |
| FHA mortgage | 50% (up to 57% w/ compensating factors) | 43% |
| VA mortgage | No hard cap; residual income test | 41% |
| Auto loan | 50% | 40% |
| SBA 7(a) business loan | Global DBSCR >1.15 | 1.25+ |
Worked example: does this borrower qualify?
Monthly income: $8,000 gross. Monthly debts:
- Rent: $2,000
- Auto loan: $450
- Student loans: $380
- Credit card minimums: $120
- Proposed personal loan (new): $500
Total: $3,450 / $8,000 = 43.1% DTI. This borrower qualifies for a Loanplaced personal loan (under the 45% cap), but wouldn't get the best pricing. Options: pay down the credit card balances to eliminate the $120 minimum, or request a smaller loan.
Three ways to fix a DTI that's too high
- Pay down installment debt. Focus on debts closest to being paid off — eliminating one payment entirely helps DTI more than reducing several balances by 20%.
- Refinance existing debt to a longer term. Lower monthly payment reduces DTI. Loanplaced runs this scenario for borrowers whose DTI is the only barrier.
- Add a co-borrower. Their income counts toward the ratio. Common on mortgages and auto loans.