Debt-to-income ratio, explained simply
5 min read · Credit
The short answer
Debt-to-income ratio (DTI) is your total monthly debt payments, including the new housing payment, divided by your gross monthly income. Lenders use it to judge whether you can comfortably repay the loan. Allowed limits vary by program and by the strength of the rest of the file.
How to calculate it
Add the proposed housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA dues) to minimum monthly payments on car loans, student loans, credit cards, and other debts. Divide by gross monthly income before taxes.
Example: $2,800 housing plus $700 other debts equals $3,500. On $9,000 gross monthly income, DTI is about 39%.
What usually does not count
Utilities, phone bills, insurance premiums outside the mortgage, and groceries are not part of DTI, though they matter for your real budget.
Ways to improve DTI
The most effective moves:
- Pay down or pay off a small installment loan
- Lower revolving balances, which lowers the minimum payments
- Add a qualifying co-borrower's income
- Look at a lower price point or larger down payment
Talk it through with a licensed advisor
Every file is different. We will run your numbers through multiple wholesale lenders and explain the trade-offs before you commit to anything.
This article is general education, not financial advice, and is not an offer or commitment to lend. Program terms are subject to credit approval and may change without notice.
Ready to apply what you learned?
Start your application online at your own pace, or talk to a licensed advisor first. Either way, your next step stays clear.