I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.
A high debt-to-income ratio is one of the most common reasons California buyers get turned down — even high earners, because California loan amounts are so large. But “DTI too high” often means “too high for that lender or that program.” DTI limits differ by loan type, the way debts are counted differs (student loans especially), and there are concrete ways to bring the number down. Here’s how I approach a high-DTI file.
My First Questions When Your DTI Is Too High
When your DTI is too high, I start asking questions. Number one: is there a family member who might be able to help you qualify? A parent or relative can sometimes go on the loan as a non-occupant co-borrower without living in the home.
If the answer is no and you’re W-2 only, honestly, there aren’t many options, unless your file is strong enough for an alternative-documentation program (bank statements, P&L or assets). One option I have is a CDFI program with no DTI calculation and no income or employment verification. It’s for primary residences and second homes, and it relies on your credit, down payment and reserves instead of your income ratios.
If you own a business, we have more options: bank statements, P&L and asset depletion, to name a few.
How DTI Is Calculated
DTI is your monthly debt payments divided by your gross (pre-tax) monthly income. Lenders look at two versions:
- Front-end (housing) ratio: the new housing payment only — principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues.
- Back-end (total) ratio: housing plus car loans and leases, student loans, credit card minimums, personal loans, child support and other recurring obligations. This is the number that usually decides approval.
Example: $12,000 gross monthly income, a $4,200 proposed housing payment, and $800 of other debts gives a back-end DTI of ($4,200 + $800) ÷ $12,000 = 41.7%.
What doesn’t count: utilities, phone, groceries, insurance premiums other than homeowners, and credit cards that report a $0 balance. For the full basics, see my DTI guide for California mortgages.
DTI Limits by Loan Type in 2026
| Loan type | Typical maximum back-end DTI | Notes |
|---|---|---|
| Conventional (Fannie Mae, DU) | Up to 50% | Automated approval decides; manually underwritten loans are held to 36%, or up to 45% with credit and reserve requirements |
| FHA | Often above 50% with automated approval | Manually underwritten FHA: 43%, up to 50% with compensating factors |
| VA | 41% guideline — not a hard cap | Residual income (money left over each month) carries as much weight as the ratio |
| Jumbo | Varies by lender, often tighter than agency | Each jumbo investor sets its own limit, reserves and credit requirements |
| Non-QM | Varies; some programs to 50% or more | Income may be calculated from bank statements or assets instead of tax returns |
A bank that caps you at 43% or 45% may simply be applying its own stricter overlay. That’s one of the first things I check when someone comes to me after being told their DTI is too high.
How to Lower Your DTI Before Applying
Pay off or pay down revolving debt
Credit card minimum payments count even if you pay the card in full each month — but a card that reports a $0 balance adds nothing. Paying off a $5,000 card with a $150 minimum removes $150 a month; on $12,000 of income, that’s a 1.25-point drop.
Pay off a car loan or other installment debt
Eliminating a $600 car payment moves DTI faster than almost anything else. Under Fannie Mae rules, an installment loan with ten or fewer payments left can be left out of DTI unless the payment significantly affects your ability to pay — but lease payments always count, no matter how few months remain.
Document all of your income
Overtime, bonus, commission, part-time jobs, rental income, Social Security, pensions and investment income can all count if they’re documented and likely to continue. Many high earners leave income on the table — for example, RSUs that a lender can count with the right documentation (see RSU and equity compensation income).
Add a co-borrower
A spouse, partner or parent on the loan adds their income — and their debts. A non-occupant co-borrower (often a parent who won’t live in the home) is allowed on many programs.
Reduce the payment
A 30-year term instead of 15, a larger down payment, a rate buydown, or a slightly lower price all shrink the housing payment. On a $900,000 home, putting an extra $45,000 down cuts principal and interest by roughly $300 a month at recent rates. For larger loans, an interest-only or 40-year option can lower the qualifying payment, though these are non-QM products with trade-offs.
Compensating Factors That Help
Automated underwriting systems weigh the whole file. Things that help a high-DTI file get approved:
- Strong credit scores and a clean recent payment history
- Substantial cash reserves after closing
- A larger down payment (lower loan-to-value)
- A long, stable job history
- Minimal “payment shock” — a new payment close to what you already pay in rent
- For VA loans, residual income well above the required minimum
Student Loans: Where Program Choice Changes Everything
Student loans are where the same borrower can look very different to different programs. Here’s how each counts the payment:
| Program | How the student loan payment is counted |
|---|---|
| Fannie Mae | The payment on the credit report. On an income-driven plan with a documented $0 payment, the lender can qualify you at $0. Deferred or in forbearance: 1% of the balance, or a fully amortizing payment based on documented terms. |
| Freddie Mac | If the credit report shows $0, 0.5% of the balance unless documentation supports a different payment above zero. |
| FHA | The reported or documented payment if it’s above zero; 0.5% of the balance if the reported payment is $0 — including deferred loans. |
| VA | Loans deferred at least 12 months past closing can be excluded. Otherwise, 5% of the balance ÷ 12 is the threshold; a lower payment needs a statement from the servicer. |
| USDA | The reported or documented payment if above zero; otherwise 0.5% of the balance. |
Example: $120,000 in student loans
A buyer earns $10,000 a month, has a $3,500 proposed housing payment and no other debts, and owes $120,000 in student loans:
- Fannie Mae, documented $0 income-driven payment: $0 counted — DTI 35%.
- VA (5% ÷ 12 threshold): $500 — DTI 40%.
- FHA or Freddie Mac, $0 reported: 0.5% = $600 — DTI 41%.
- Fannie Mae, loans in deferment or forbearance: 1% = $1,200 — DTI 47%.
Same borrower, same house — four different DTIs. That’s why I model the file across programs before choosing one.
What’s changing with federal student loans
The SAVE plan ended July 1, 2026, and the new Repayment Assistance Plan (RAP) has a $10 minimum monthly payment, so fewer borrowers will show $0 payments going forward. If your plan or payment is about to change, tell your loan officer — lenders qualify you on the documented payment, and a pending recertification can change it. Forgiveness only helps once the balance actually reports as paid; don’t build a purchase around forgiveness that hasn’t happened yet. Other strategies: pay off a small loan entirely, or add a co-borrower without student debt.
When the Numbers Still Don’t Work: Non-QM Options
If your DTI is genuinely over agency limits, non-QM lenders look at the file differently:
- Bank statement loans calculate income from 12–24 months of deposits — often much higher than a self-employed borrower’s tax-return income.
- Asset depletion loans turn investment and retirement balances into qualifying income.
- DSCR loans for investment properties qualify on the property’s rent, not your personal DTI.
These programs typically carry higher rates and larger down payments than agency loans, but for the right borrower they’re the difference between a denial and a closing. With access to 40+ wholesale lenders, I can see which program — agency or non-QM — gives you the best combination of approval odds and cost.
Frequently Asked Questions
What is the maximum DTI for a California mortgage in 2026?
It depends on the program. Fannie Mae’s automated underwriting can approve up to 50%. FHA’s automated underwriting can approve some files above 50%, while manually underwritten FHA loans are held to 43%, or 50% with compensating factors. VA uses a 41% guideline plus residual income. Jumbo and non-QM limits are set by each lender.
Can I get a mortgage with a 50% DTI?
Often, yes — with the right program and a strong file. Conventional loans through Fannie Mae’s automated underwriting can go to 50%, FHA can sometimes go higher, and some non-QM programs allow 50% or more. Good credit, reserves and a larger down payment improve the odds.
How are student loans counted in DTI?
It depends on the program. Fannie Mae can use a documented $0 income-driven payment, but uses 1% of the balance or an amortizing payment for deferred loans. FHA, Freddie Mac and USDA use 0.5% of the balance when the reported payment is $0. VA uses 5% of the balance divided by 12 unless the loan is deferred at least 12 months past closing or the servicer documents a lower payment.
What is the fastest way to lower my DTI?
Pay off a debt with a large monthly payment, such as a car loan, or pay credit cards down to a $0 reported balance. Adding a co-borrower with income, documenting income you haven’t been credited for, or lowering the loan amount also work quickly.
What if my DTI is too high for every conventional program?
Non-QM loans calculate income differently — from bank statement deposits or from assets — and some allow higher DTIs. They usually cost more than agency loans, but they can turn a denial into an approval.
Related Resources
- Debt-to-Income Ratio for California Mortgages
- How Much House Can You Afford in California?
- Non-QM Mortgages
- Non-Occupant Co-Borrowers
- VA Loans in California
- FHA Loans in California
- Mortgage Application Denied?
Official Sources & References
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
