What Is Debt-to-Income Ratio?
DTI compares a borrower's total monthly debt payments to their gross monthly income, expressed as a percentage — one of the main factors lenders use to decide how much they'll lend.
Advanced Explanation
Debt-to-income compares recurring monthly debt obligations to gross monthly income. Underwriters typically look at a front-end (housing) ratio - the proposed principal, interest, taxes, insurance and HOA dues - and a back-end ratio that adds other recurring debts such as auto, student loan and minimum card payments. Maximum allowable DTI varies by loan program and by compensating factors such as reserves or credit score.
Formula
DTI = Total Monthly Debt Payments ÷ Gross Monthly Income × 100
Example
A borrower with $7,000 in gross monthly income and $1,750 in total monthly debt payments (including the new mortgage) has a 25% DTI.
Why It Matters
Most conventional lenders cap total DTI around 43-50%, so a high DTI can limit how much home a buyer qualifies for even with strong income.
Home Affordability Calculator →