Your DTI is the number mortgage lenders scrutinize most. Here's exactly how to calculate it, what counts, and the thresholds that get loans approved.
What Is a Debt-to-Income Ratio?
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward paying debts. Lenders use it as a quick gauge of whether you can comfortably take on a new loan payment. There are two versions: front-end DTI counts only your housing payment, while back-end DTI counts all of your monthly debt. When a lender quotes "your DTI," they almost always mean the back-end number.
The formula is simple:
DTI = (Total monthly debt payments ÷ Gross monthly income) × 100
Gross income means your pay before taxes and deductions. Use the minimum required payment on each debt, not what you actually pay — if you pay extra on a credit card each month, only the minimum counts.
How to Calculate Your DTI Step by Step
- Add up your gross monthly income — salary, plus any reliable extra income. If you're paid hourly, convert it first with our hourly to salary calculator.
- Total your monthly debt payments — housing (rent or the proposed mortgage), car loans, student loans, and minimum credit card payments.
- Divide debt by income and multiply by 100.
Worked example: Say you earn $6,500 gross per month. Your debts are a $1,800 mortgage, a $400 car payment, a $250 student loan, and $150 in credit card minimums — $2,600 total. Your back-end DTI is 2,600 ÷ 6,500 = 40%. Your front-end (housing-only) DTI is 1,800 ÷ 6,500 = 27.7%. You can run your own numbers in seconds with the debt-to-income calculator.
What Counts as Debt (and What Doesn't)
Counts toward DTI: mortgage or rent, car loans and leases, student loans, personal loans, minimum credit card payments, child support and alimony, and any other recurring loan payment.
Does NOT count: utilities, phone and internet, groceries, gas, insurance premiums, taxes, and streaming subscriptions. These are living expenses, not debts — so leave them out.
DTI Requirements by Loan Type
Different loans allow different maximum DTIs:
- Conventional mortgage: usually up to 45%, sometimes 50% with strong credit and reserves.
- FHA loan: typically up to 43%, and as high as ~50% with compensating factors.
- VA loan: no hard cap, but ~41% is a common guideline alongside residual-income tests.
- Auto loans: lenders prefer a back-end DTI under 45–50%, including the new car payment.
- HELOC / home equity: generally 43% or lower.
Planning a home purchase? Pair this with our home affordability calculator and mortgage payment calculator to see what fits.
What Is a Good Debt-to-Income Ratio?
The classic guideline is the 28/36 rule: keep housing at or below 28% of gross income and total debt at or below 36%. Below 36% keeps the most doors open and earns the best rates. The 37–43% range is still workable for many mortgages. Above 43% starts to limit options, and above 50% is a red flag to most lenders.
How to Lower Your DTI
You can improve your ratio two ways — reduce debt or raise income:
- Pay off a small loan entirely to remove its whole payment from the calculation (a debt payoff calculator helps you plan this).
- Avoid taking on new debt in the months before applying — lenders re-check DTI right before closing.
- Refinance or consolidate to a lower monthly payment.
- Add documented income, such as a raise, bonus history, or a side income you can prove.
Frequently Asked Questions
How do I calculate my debt-to-income ratio for a mortgage?
Add your future housing payment to your other monthly debts, divide by your gross monthly income, and multiply by 100. Lenders look at this back-end DTI; most conventional loans want it at or below 45%.
Does rent count in your debt-to-income ratio?
Yes — your current rent counts as a debt for most loans. When you apply for a mortgage, lenders replace your rent with the proposed new housing payment in the calculation.
What is the maximum DTI for an FHA loan?
FHA loans typically allow a back-end DTI up to 43%, and sometimes close to 50% with compensating factors like a high credit score, low loan-to-value, or significant cash reserves.
Do utilities and insurance count toward DTI?
No. Utilities, phone bills, insurance premiums, groceries, and taxes are living expenses, not debts, so they're excluded from your debt-to-income ratio.
How do student loans affect your DTI?
Student loan payments count as monthly debt. If your loans are in deferment, lenders often estimate a payment (commonly 0.5–1% of the balance) and include that figure in your DTI.