What Is DTI (Debt-to-Income Ratio)?
Your total monthly debt payments divided by gross monthly income, used by lenders to qualify you.
Definition
DTI shows how much of your gross monthly income goes to required debt payments. Lenders use it to gauge whether you can take on more debt without trouble. There are two flavors: front-end (housing only) and back-end (housing plus all other debts: cars, student loans, credit cards). Most conventional loans cap back-end DTI at 43%, FHA can go up to 50%. The lower your DTI, the more buying power you have and the better rates you qualify for.
Formula
Back-end DTI = (Total Monthly Debt Payments / Gross Monthly Income) × 100
Example
Earning $6,000/month with $1,500 mortgage, $400 car payment, and $200 student loans: DTI = $2,100 / $6,000 = 35%.
Use It
Try the Home Affordability CalculatorRelated Terms
Front-End RatioThe percentage of gross monthly income that goes to housing costs (PITI). Lenders typically cap at 28-31%.LTV (Loan-to-Value Ratio)The loan amount divided by the property's appraised value, expressed as a percentage.Gross IncomeTotal earnings before any taxes, deductions, or withholdings are subtracted.