Reference chart
DTI and LTV Thresholds
By &Pixels, the studio that builds MyCalculator.to. Thresholds are the common published guidelines. Any individual lender sets its own, and a loan officer is the authority on yours.
The two ratios a mortgage is decided on, what each threshold actually is, and why the 43 percent everybody quotes is no longer a rule.
What DTI and LTV measure
They answer two different questions. Debt-to-income asks whether you can carry the payment, so it is about you. Loan-to-value asks what the lender recovers if you cannot, so it is about the house. A file is judged on both, and the useful thing to know is that a lender will usually flex one of them for a strong application but very rarely both.
That is why a large deposit can rescue a high DTI, and why a modest DTI gives you room on a low deposit. The two ratios trade against each other, and knowing which one you have slack in tells you which part of the application to work on.
Debt-to-income thresholds
| Loan type | DTI, percent | Note |
|---|---|---|
| The 28/36 rule | 28 front, 36 back | the conservative planning figure, not a lender rule |
| Conventional, automated underwriting | up to 50 | above 45 usually needs reserves or a strong credit score |
| FHA, automated | up to about 50 | the manual guideline is 31 front and 43 back |
| VA | about 41 as a guide | residual income carries more weight than DTI |
| USDA | 29 front, 41 back | waivers exist with compensating factors |
| Jumbo | often 43 or below | set by the lender holding the loan, so it varies most |
Front-end is housing alone. Back-end is housing plus every other monthly debt payment, and it is the figure a lender means when it says DTI without qualifying it. The 43 percent number quoted on almost every chart online was the old Qualified Mortgage ceiling. It is no longer the regulatory test, which is now price-based, but it stayed in use as an underwriting habit, so it still describes where a lot of files get harder.
The calculators behind this
Loan-to-value thresholds
| Point | LTV, percent | What it means |
|---|---|---|
| VA and USDA purchase | up to 100 | no down payment required |
| FHA purchase | up to 96.5 | 3.5 percent down with a qualifying score |
| Conventional, low down payment | up to 97 | first-time buyer programmes |
| PMI required above | 80 | the line that costs money every month |
| Request PMI cancellation | 80 | you have to ask, it is not automatic |
| Automatic PMI termination | 78 | by law, on the original schedule |
| Cash-out refinance | usually 80 | the equity you cannot touch |
| Home equity, combined | 80 to 90 | first mortgage and second added together |
The gap between 80 and 78
These two lines look like rounding and they are not. At 80 percent of the original value you may request that private mortgage insurance be cancelled. At 78 percent the servicer must terminate it automatically, and that automatic point is calculated on the original amortisation schedule.
So automatic termination ignores two things: any appreciation in the property, and any extra payments you have made. A home that has gained value, or a loan you have paid ahead on, can sit well below 80 percent in reality while the schedule still says otherwise. Nobody writes to tell you. Asking, and paying for an appraisal if the value is what changed, is the only route to it.
How to work out both
- Add up your monthly debt payments. Minimum credit card payments, car loans, student loans, child support. Not utilities, food or insurance.
- Include the new housing payment. Principal, interest, taxes, insurance and any HOA fee. The proposed payment counts, not your current rent.
- Divide by gross monthly income. Before tax, not take-home. That is the back-end DTI, and it is the one lenders quote.
- Divide the loan by the property value for LTV. Value is the purchase price or the appraisal, whichever is lower, which surprises people on a bidding war.
- Check both against the tables. A lender will usually stretch one ratio for a strong file. Stretching both at once is the request that gets declined.
For your own figures, the DTI calculator gives both the front and back ratios from a list of debts, and the LTV calculator works from price and deposit. If you are still choosing a deposit, the down payment calculator will show you what crossing the 80 percent line is worth in monthly terms.
These are published guidelines rather than promises. Individual lenders set their own overlays, and the loan officer looking at your file is the person who can tell you what they will actually do with it.
Formula & Methodology
Did you know? Loan-to-value uses the purchase price or the appraised value, whichever is lower. In a bidding war that distinction bites: paying above appraisal does not raise the value the ratio is calculated on, so the overage comes out of the deposit rather than the loan.
Sources
- Consumer Financial Protection Bureau, General QM Final Rule and the price-based threshold
- Homeowners Protection Act, on automatic termination and borrower-requested cancellation of PMI
- Fannie Mae Selling Guide and FHA Single Family Housing Policy Handbook 4000.1