Get help planning your purchase and what your debt means for it.

What DTI is: your monthly debts vs your gross income

Affordability starts with the debt-to-income ratio, or DTI: the share of your gross monthly income that goes to debts. Lenders actually look at two numbers, and knowing both keeps you from getting blindsided later.

• Front ratio: the proposed housing payment alone, including principal, interest, taxes, insurance, and HOA dues. In Texas that payment is fat, because taxes and insurance are real money here.
• Back ratio: everything else on top, all your other monthly debts like car loans, student loans, cards, and child support, added to the housing payment. ^[1] Consumer Financial Protection Bureau.

The worked calculation example

Let us run a real one. Say you gross $8,333 a month, which is $100,000 a year, and you carry $1,300 a month in car, card, and student-loan payments. Most conventional loans work comfortably around a 43% total DTI, and some programs allow higher with compensating factors. ^[2] U.S. Department of Housing and Urban Development.

• 43% of $8,333 is about $3,583, the ceiling for all monthly obligations including the new house payment.
• Subtract your $1,300 in existing debts: the new housing payment can be roughly $2,283 a month, total, taxes and insurance included.
• Now imagine the same buyer with only $400 a month in debts. The housing payment ceiling jumps to about $3,183, and the house they can shop for moves up by a very large step.

The exact payment gets built from the property's real taxes and the real insurance quote, not a rule of thumb, which is why the pre-approval number matters. Because Texas is a high tax and insurance state, the front ratio can be a bigger share than in low-cost states, so I run the real local numbers, not a national rule of thumb. ^[3] Texas Comptroller.

The front and back-end limits by program

Every program runs its own version of the same gate. Here is how the limits shape up for the loans Texas buyers actually use:

• Conventional: lenders like a total DTI around 43%, and some go higher with compensating factors like strong reserves or a bigger down payment.
• FHA: generally allows more debt relative to your income than conventional, which is one of the reasons FHA is so popular with first-time buyers who still carry student loans or a car payment.
• USDA: the strictest of the group, typically targeting a total debt ratio around 41%, which is why USDA caps how much house you can buy even at zero down.
• VA: uses residual income and its own debt guidance rather than a single ratio, which can make VA more forgiving for families with higher debts.

Approving you is one thing; living with the payment is another. Spend below the maximum approval, keep six months of payments in reserve, and the house you can afford is the one that still leaves your budget comfortable.

What counts as debt

Lenders count every recurring monthly obligation: car loans, student loans, credit card minimums, personal loans, child support, alimony, and any other installment payment that shows up on your credit report every month. They also count debts you do not finance in the usual way, which is why the list surprises people.

• Rent: your current rent is not a repayment debt like a loan or a card, so it does not add to the back-end ratio as a monthly obligation, but your rent history tells a lender a lot about payment behavior and gets verified.
• Student loans: they count at the payment on your credit report, even in deferment or forbearance, because the lender uses a calculated payment to protect you from a future spike.
• Cards: the minimum payment counts, which is why paying balances down, not just keeping them current, is the fastest way to shrink the number.
• Child support and alimony: court-ordered payments count as recurring obligations when they show up on your report or your bank statements.

How to improve your ratio

The fix is mostly mathematical, and it works before you ever apply:

1. Pay down revolving balances to lower the minimums, not just the balance you see on the app.
2. Do not add new debt: no new car, no new card, no co-signing in the six months before you apply.
3. Keep every payment current and fix any credit-report errors that inflate your debt.
4. Bring a bigger down payment or larger reserves, because compensating factors can help a lender approve a higher ratio.
5. Remember that in Texas the housing payment includes taxes and insurance, so a lower price point or a homestead exemption conversation can do more for your budget than a rate tweak. ^[3] Texas Comptroller

The real-world money consequence

Here is the part that pays the bills: every dollar of monthly debt is a dollar the house payment cannot use. The buyer with $1,300 a month in debts on a $100,000 income lands around a $395,000 home at typical buying power, while the same income carrying only a few hundred dollars a month in debts steps up meaningfully, because the payment ceiling is what actually drives the price you can shop.

DTI is not a punishment, it is a measurement. Run your numbers early, clean up the debt you can, and let the math decide the price range you walk into. That is how a buyer stops guessing and starts shopping with a real number.

Watch Patrick run the affordability math

This is the video where I put real incomes, real debts, and real Texas payments on the board, and show what each income level can actually buy.