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Debt-to-income ratio (DTI) measures your monthly debt payments against your monthly income. It’s a key factor in determining how much you can borrow with a self-employed mortgage program.

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How DTI Is Calculated

DTI = Total Monthly Debt Payments ÷ Gross Monthly Income For self-employed mortgage programs, your qualifying income comes from whichever documentation method you’re using—bank statement deposits, 1099 totals, CPA-prepared P&L net profit, or asset depletion calculation—rather than tax returns or pay stubs. Example: Your bank statements produce $15,000/month qualifying income. Your monthly debts total $6,000. $6,000 ÷ $15,000 = 40% DTI

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What Counts as Debt

Lenders include these monthly obligations:
  • Proposed mortgage payment (principal, interest, taxes, insurance, homeowners association dues)
  • Car loans and leases
  • Student loans
  • Credit card minimum payments
  • Personal loans
  • Other mortgages or HELOCs
  • Alimony or child support payments
They don’t typically count utilities, cell phone bills, insurance premiums (other than homeowners), or subscriptions.

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DTI Limits for Self-Employed Mortgage Programs

Maximum DTI varies by lender, credit score, LTV, and loan amount. A borrower with 750 credit and 30% down may qualify at 50% DTI, while someone with 660 credit and 10% down might be capped at 43%.

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Compensating Factors

Lenders may allow higher DTI if you have:
  • Higher credit score (720+)
  • Lower LTV / larger down payment
  • Significant cash reserves (12+ months)
  • Strong income trending upward
  • History of managing similar payment amounts

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Lowering Your DTI

To improve your DTI before applying:
  • Pay off smaller debts (car loans, credit cards)
  • Avoid taking on new debt
  • Increase qualifying income by choosing the optimal documentation method or statement period
  • Consider a less expensive property
A few percentage points of DTI can mean the difference between approval and denial, or unlock better loan terms.