Debt-to-Income Ratio (DTI)

Loans & Borrowing
Updated Apr 2026 • Has calculator

Monthly debt payments as a percentage of gross monthly income, used to qualify for mortgages.

What is DTI Ratio?

The debt-to-income (DTI) ratio measures total monthly debt obligations as a percentage of gross monthly income. Lenders use it as the primary qualification metric for mortgages: the CFPB qualified-mortgage rule caps the back-end DTI at 43%, and most conventional lenders prefer it at or below 36%. The front-end DTI covers only housing costs; the back-end DTI includes all recurring debt payments (housing, car, student loans, credit cards).

Formula

DTI = (Monthly Debt Payments ÷ Gross Monthly Income) × 100

Worked Example

Worked example — Conventional mortgage applicant — 2024

2024

Step 1  Proposed mortgage payment: $1,800/mo
Step 2  Car loan: $350/mo | Student loan: $200/mo | Credit cards: $100/mo
Step 3  Total monthly debt: $2,450
Step 4  Gross monthly income: $8,000 ($96,000/year)
Step 5  DTI = $2,450 ÷ $8,000 × 100 = 30.6%
Step 6  → Comfortably below the 36% conventional limit

Source: Consumer Financial Protection Bureau — Debt-to-Income Ratio (2024-01-01)

Calculate DTI Ratio

Sum of all monthly debt: mortgage/rent, car, student loans, credit cards, other

Pre-tax monthly income from all sources

DTI Ratio

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Not investment advice.

How to Interpret DTI Ratio

< 20
Excellent — strong financial position
20 – 36
Good — meets conventional lending standards
36 – 43
Borderline — may limit loan options
> 43
High — exceeds QM rule; consider paying down debt first
Sources
  1. Consumer Financial Protection Bureau — DTI
  2. Fannie Mae — Selling Guide B3-6-02
  3. Investopedia — DTI