Also written as:
DTI
The percentage of your gross monthly income that goes to monthly debt payments. Lenders use it to assess whether you can afford another loan. Lower is better.
DTI — Debt-to-Income ratio — measures how much of your gross monthly income is already committed to debt payments. It's one of the most important numbers in your mortgage application, often as critical as your credit score.
Lenders look at two flavors: Front-end DTI is just your proposed mortgage payment (including taxes, insurance, HOA) divided by your gross monthly income. Back-end DTI adds all your other monthly debt obligations — car payments, student loans, minimum credit card payments, child support — to the mortgage payment.
Most conventional loans cap back-end DTI at 43-45%, though some programs allow up to 50% with strong credit and reserves. FHA can go higher, sometimes to 56-57%.
Example
You earn $8,000/month gross. Your proposed mortgage is $2,500. You also pay $400/month on a car loan and $200 minimum on credit cards. Back-end DTI = ($2,500 + $400 + $200) ÷ $8,000 = 38.75%. Under 43% is the standard limit.
Formula
DTI = (Total monthly debt payments ÷ Gross monthly income) × 100
Also known as
DTI, debt to income, debt-to-income ratio
Source:
CFPB