What Is Debt-to-Income Ratio (DTI)?
Your DTI ratio compares your monthly debt payments to your gross monthly income (before taxes). Lenders use DTI to assess your ability to manage mortgage payments responsibly.
DTI includes:
- Proposed housing payment (PITI + HOA)
- Auto loans
- Student loans
- Credit card minimums
- Personal loans
- Child support or alimony
- Other recurring debt obligations
A lower DTI generally means you are more likely to qualify for a mortgage.
Understanding the Two Types of DTI
1. Front-End DTI (Housing Ratio)
This measures what percentage of your income goes toward your new housing payment:
- Principal & interest
- Property taxes
- Homeowners insurance
- PMI (if applicable)
- HOA dues
Typical target: ≤ 36%
2. Back-End DTI (Total Debt Ratio)
This includes all monthly debt payments:
- Housing costs
- Auto loans
- Student loans
- Credit card payments
- Installment loans
- Child support/alimony
- Other recurring debts
Typical target for most mortgages: ≤ 45%
Some programs allow higher DTIs with strong compensating factors.
Why DTI Matters for Mortgage Approval
Lenders review DTI to determine:
- How much home you can afford
- Whether your income is stable
- If your existing debt leaves enough room for a mortgage
- Which loan programs you qualify for (Conventional, FHA, VA, USDA)
A lower DTI can help you:
- Qualify for a larger loan amount
- Get a better interest rate
- Reduce mortgage insurance costs
- Improve overall loan terms
How This DTI Calculator Works
The calculator uses three main components:
1. Gross Monthly Income
Includes:
- Primary borrower income
- Co-borrower income
- Bonuses, overtime, or secondary income (if stable and documented)
2. Housing Costs (Front-End DTI)
Monthly PITI + HOA:
- Mortgage principal & interest
- Property taxes
- Homeowners insurance
- Private mortgage insurance (PMI)
- HOA dues
3. Monthly Debts (Back-End DTI)
Includes all required minimum payments reported to credit bureaus.
The calculator then computes:
Front-End DTI = Housing costs ÷ Gross income
Back-End DTI = (Housing costs + debts) ÷ Gross income
You also get:
- Qualification commentary
- Income vs. obligations chart
- Side-by-side DTI comparison
What Is a Good DTI Ratio?
Excellent: Below 36%
Strong likelihood of mortgage approval with competitive terms.
Good: Below 43%
Meets requirements for most Conventional and FHA loans.
Acceptable: Up to 50%
Possible with compensating factors such as high credit score or strong reserves.
High Risk: Above 50%
Approval becomes difficult; lenders may require debt reduction or a smaller loan.
Frequently Asked Questions (FAQs)
What debts are included in DTI?
All recurring debts such as car loans, student loans, credit cards, personal loans, and child support/alimony.
Is rent included in DTI?
Rent is not included unless you are applying for a mortgage and listing it as current housing debt.
Does DTI include groceries, utilities, or gas?
No. Only required minimum monthly payments are counted.
Is a high DTI always bad?
Not necessarily. Some loan programs (like FHA) allow higher DTIs with strong compensating factors.
Can I qualify for a mortgage with a DTI over 50%?
It’s difficult but possible with FHA or VA loans if your credit, income, and reserves are strong.