Debt-to-Income
DTI ratio for loans
About This Calculator
Debt-to-Income ratio (DTI) is the percentage of your gross monthly income that goes toward debt payments. Lenders use DTI to evaluate your ability to manage monthly payments and repay borrowed money. A lower DTI signals better financial health and improves your chances of loan approval at favorable rates.
Formula
DTI = (Total Monthly Debt Payments / Gross Monthly Income) × 100%
Front-end DTI = Housing costs / Gross monthly income
Back-end DTI = All debt payments / Gross monthly income
Example Calculation
Monthly income: $6,000; Mortgage: $1,200; Car loan: $350; Student loan: $200
- Total debt payments = $1,200 + $350 + $200 = $1,750
- DTI = ($1,750 / $6,000) × 100 = 29.2%
DTI = 29.2% — Good (below 36% threshold)
DTI Ranges and Lender View
| DTI Range | Lender Assessment | Loan Eligibility |
|---|---|---|
| < 20% | Excellent | Qualify for best rates and terms |
| 20% – 35% | Good | Most loans available with good terms |
| 36% – 43% | Fair | May qualify; stricter underwriting |
| 44% – 49% | Poor | Difficulty qualifying; high-risk |
| 50%+ | Very Poor | Most lenders will decline |
Frequently Asked Questions
What DTI do lenders require for a mortgage?
Most conventional lenders prefer a back-end DTI below 36% and front-end DTI below 28%. FHA loans allow up to 43% DTI (and sometimes 50% with compensating factors). VA loans are more flexible but generally target under 41%.
What counts as debt in DTI?
DTI includes: mortgage or rent, car loans, student loans, personal loans, credit card minimum payments, child support, and alimony. It does NOT include utilities, insurance, groceries, phone bills, or other living expenses.
How can I improve my DTI?
Two ways: (1) increase income — side work, promotion, or additional household earner; (2) reduce debt — pay down loan balances, consolidate high-payment debts, or pay off small debts entirely to eliminate their monthly payment.
What is the difference between front-end and back-end DTI?
Front-end DTI includes only housing costs (mortgage/rent, property taxes, insurance). Back-end DTI includes all monthly debt obligations. Mortgage lenders evaluate both — front-end should be below 28% and back-end below 36-43%.