Debt-to-income ratio (DTI)
Your total monthly debt payments divided by your gross monthly income. Lenders use it to judge how much mortgage you can handle, typically capping it around 43%.
What does debt-to-income ratio mean?
DTI tells a lender how much of your income is already spoken for. Lenders look at two versions: the front-end ratio (just the housing payment) and the back-end ratio (housing plus all other debt), with conforming loans generally capping the back end near 43% — sometimes higher with compensating factors. A lower DTI both improves approval odds and leaves more comfortable room in your budget.
Calculating your DTI
Take a borrower earning $8,000 a month before taxes:
| Monthly | Ratio | |
|---|---|---|
| Proposed housing payment (PITI) | $2,400 | 30% front-end |
| Car loan | $400 | |
| Student loan | $200 | |
| Total debt payments | $3,000 | 37.5% back-end |
Lenders count minimum required payments on credit cards and loans, plus child support and alimony — not utilities, groceries or phone bills.
Limits by loan type
- Conventional: about 45%, up to 50% with strong credit and reserves.
- FHA: 43% as a standard, up to about 57% with compensating factors.
- VA: a 41% guideline, but residual income matters more.
- USDA: about 41%, sometimes up to 44%.
To lower your DTI before applying, pay down balances with high minimum payments, avoid new debt, or add a co-borrower’s income.
Frequently asked
What is a good debt-to-income ratio for a mortgage?
Aim for a back-end ratio (all debts) at or below 36%, with 43% the common ceiling for conforming loans and the housing portion alone near 28%. The lower your DTI, the better your approval odds and the rate you are offered.
How do I calculate my DTI?
Add up your monthly debt payments — mortgage, car, student loans, credit-card minimums — and divide by your gross (pre-tax) monthly income. If debts total $2,100 and you earn $6,000 a month, your DTI is 35%.
What counts toward debt-to-income?
Recurring debt: the proposed housing payment, auto and student loans, credit-card minimums, and any child support or alimony. It excludes everyday costs like utilities, groceries and insurance that are not reported as debt.
Put it to use
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Related terms
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