Debt-to-income ratio
DTIUpdated
What is debt-to-income ratio?
DTI is your total monthly debt payments divided by your gross monthly income. Lenders use it to judge capacity; you can use it as a personal budgeting ceiling.
How it is calculated
DTI = (total monthly debt payments ÷ gross monthly income) × 100
Debt-to-income ratio questions
- What is DTI?
- Debt-to-income ratio: your total monthly debt payments divided by your gross monthly income, as a percentage. Lenders use it to judge whether you can carry another payment.
- How is debt-to-income calculated?
- Add up the monthly payments on every debt you owe (the proposed housing payment, car loans, student loans, minimum card payments) and divide by your gross monthly income, before tax. Utilities, groceries and insurance premiums are not counted.
- Does DTI matter for a refinance?
- Yes. A refinance is a new loan application, so the lender re-checks it. That catches people out when income has fallen or other debts have grown since the original mortgage was written, even though the house and the payment look unchanged.
- What DTI do lenders want?
- 43% is the widely used ceiling for a qualified mortgage, and many lenders prefer lower. The figure counts the proposed housing payment along with every other monthly obligation.
What it means in practice
The back-end ratio counts housing plus all other debt payments. The front-end ratio counts housing alone.
Common conventional guidelines land near 43% to 50% back-end, though automated underwriting approves higher with compensating factors. That is an approval threshold, not a comfort threshold.
The affordability calculator here treats DTI as a planning assumption you set yourself. Being approved for a payment and being comfortable with it are different questions.