How to calculate debt-to-income ratio
Your debt-to-income ratio compares your monthly debt payments with your gross monthly income. Lenders use it to judge how much more debt you can carry.
The formula
DTI = total monthly debt payments ÷ gross monthly income × 100
Worked example
Monthly debts of $2,400 and gross income of $8,000 give a DTI of 30%.
How to use this calculator
Enter your gross monthly income, which is your pay before tax and deductions. Then enter your monthly housing payment and your other monthly debt payments. The debt-to-income ratio calculator shows a front-end ratio for housing alone and a back-end ratio for all debts together.
What the result means
A lower DTI means more of your income is free after debt payments. A back-end DTI of 36% or lower is considered strong. Many conventional loans allow up to 45%, and some go as high as 50%. Your lender sets the limit for your loan.
You may also see the 28%/36% guideline: housing costs up to 28% of gross income and all debts up to 36%. It is a rule of thumb, not a fixed requirement.
The two ratios answer different questions. The front-end ratio shows whether the housing payment alone is large for your income. The back-end ratio shows whether your debts as a whole are.
More examples
Front-end and back-end together
Take the same $8,000 income and split the $2,400 of debts into a $1,800 housing payment and $600 of other debts. Front-end DTI = $1,800 ÷ $8,000 = 22.5%. Back-end DTI = $2,400 ÷ $8,000 = 30%.
How much housing payment fits
You can run the formula backward. At a 36% back-end ratio, $8,000 of income supports $2,880 of total debt payments. With $600 of other debts, that leaves $2,280 for housing. The 28% front-end guideline gives $2,240, so the lower figure is the safer target.
Debt limits at common ratios
| Gross monthly income | Total debts at 36% | Total debts at 45% |
|---|---|---|
| $5,000 | $1,800 | $2,250 |
| $8,000 | $2,880 | $3,600 |
| $12,000 | $4,320 | $5,400 |
What changes the result
- Paying off a loan. Clearing a $400 car payment in the example cuts DTI from 30% to 25%.
- New debt. A $600 payment added to the example raises DTI from 30% to 37.5%.
- Income. The same $2,400 of debts on $6,000 of income is a DTI of 40%.
- The housing payment. It is usually the largest item, so the home price, down payment and interest rate move the ratio most.
Common mistakes
- Using take-home pay. DTI is based on gross income.
- Entering your credit card balance. Use the minimum monthly payment.
- Adding utilities, groceries or phone bills. They are not debts.
- Using your current rent when you are applying for a mortgage. Use the housing payment on the home you plan to buy.
- Leaving out child support or alimony you pay.
Related calculators
The home affordability calculator turns your income and debts into a price range. Use the mortgage calculator to estimate the housing payment to enter here. If you rent, the rent affordability calculator applies a similar income test.
Frequently asked questions
What is a good DTI?
36% or lower is considered strong. Limits vary by lender and loan type; many conventional loans allow up to 45%, and some go as high as 50%.
What counts as debt?
Housing payment, car loans, student loans, minimum credit card payments, and child support or alimony. Utilities and groceries do not count.
What are front-end and back-end DTI?
Front-end counts housing costs only. Back-end counts all debts.
Is DTI based on gross or net income?
Gross income, which is your income before tax and other deductions.
How can I lower my DTI?
Pay off or pay down a debt so its monthly payment drops, avoid new loans before you apply, or raise your income. Choosing a lower-priced home or a larger down payment reduces the housing payment.
Which housing payment should I use for a mortgage application?
The payment on the new loan, not your current rent. Include property tax and home insurance along with principal and interest.
Does a low DTI mean I will be approved?
No. DTI is one of several things a lender reviews. This calculator gives an estimate, and your lender makes the decision.