What Is Debt-to-Income Ratio (DTI)?
Debt-to-Income Ratio (DTI): Your monthly debt payments, including the new mortgage, divided by your gross monthly income.
Also called: DTI, back-end ratio
Debt-to-income ratio (DTI) compares what you owe each month to what you earn before taxes. It's the main way lenders judge whether you can afford a payment.
How it works
DTI = total monthly debt payments ÷ gross monthly income.
Debts include the new housing payment (PITI plus HOA dues), car loans, student loans, minimum credit card payments, personal loans, child support and alimony. Utilities, phone bills and groceries don't count.
The housing payment alone, divided by income, is the front-end ratio. Total DTI is sometimes called the back-end ratio.
Typical limits
| Program | Common maximum DTI |
|---|---|
| Conventional | 45%, up to 50% with strong factors |
| FHA | 43% guideline, higher with automated approval |
| VA | 41% guideline, plus residual income |
| USDA | 29% housing / 41% total |
| Jumbo | Often 43% or less |
Example
$7,500 monthly income, a $2,300 housing payment and $700 of other debts is $3,000 ÷ $7,500 = 40% DTI.
Good to know
Paying off a small debt with a high payment, like a car loan with a few months left, can lower DTI more than paying down a large credit card balance.