Valued Member
Posts: 33
Registered: ‎04-12-2011

DTI Ratio and Reserves When Applying for a Mortgage

Hi Everyone- I have posted a couple of time but usually just lurk but I have a couple of questions about the loan process.


1.  I have researched online that the DTI ration should be no more than 25% front-end and 36% back-end.  Is this DTI standard for conventional mortgages as well?  Also I took a loan out on my 401k last year when I was going through a divorce and am currently paying back the loan (taken from my pay) $112 monthly.  Will this monthly loan payment be included in my back-end DTI when applying for a loan?


2.  I have also seen mention that the banks these days require reserves when applying for a mortgage.  Is there a certain amount of reserves (exclusive ot the down-payment) that you a required to have liquid when applying?



Valued Contributor
Posts: 1,371
Registered: ‎07-29-2008

Re: DTI Ratio and Reserves When Applying for a Mortgage

1 No you are paying yourself back so it wont count

2 - it depends on the program

FHA VA USDA do not require reserves

for conventional they like to see a minimum of 2 months worth of mortgage payment

if it is an investment then I believe it is 6 months reserves


The DTI amounts you listed are very conservative you can get financing with higher DTI than that



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Brian B The Loan Professor
Mortgage Banker Lending in all 50 states -
Super Contributor
Posts: 7,701
Registered: ‎09-28-2007

Re: DTI Ratio and Reserves When Applying for a Mortgage

FHA prefers 31/43% ratios, but up to about 45% & 57% can qualify.  USDA prefers 29/41%, but up to about 38% & 49-50% can qualify with good credit & some reserves.  VA prefers 41%, but even into the 60's can qualify, although most lenders cap out at about 50-55%.


Fannie Mae can approve up to 49.99%, Freddie Mac can approve up to 55%, but anything above 45% requires excellent credit & a lot (6+) of reserves.

Valued Member
Posts: 33
Registered: ‎04-12-2011

Re: DTI Ratio and Reserves When Applying for a Mortgage

Shane- thank you for the info!  I estimate that my DTI will definitely be on the lower side around 23% front end and 34% back end.  But it's good to know that the DTI is flexible.

New Visitor
Posts: 1
Registered: ‎09-29-2012

Re: DTI Ratio and Reserves When Applying for a Mortgage

What fico score is needed to get a mortgage  loan?   Can I purchase a home with a 626 score? Thanks C40


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