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Mortgages & financing

Debt-to-Income Ratio (DTI)

Also called DTI, back-end ratio, front-end ratio

In short

Debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. Lenders use it to decide how large a mortgage payment you can afford.

Formula
Monthly debts ÷ gross income
Front-end ratio
Housing payment only
Back-end ratio
All monthly debts
Common guideline
About 36% to 43% back-end

How DTI is calculated

DTI = total monthly debt payments ÷ gross monthly income × 100.

The front-end ratio uses only your housing payment (PITI plus PMI and HOA dues). The back-end ratio adds minimum payments on car loans, student loans, credit cards, child support and other debts. Everyday costs such as utilities and groceries aren't included.

What lenders look for

Limits depend on the loan program and the rest of your file. A back-end DTI around 36% is often seen as comfortable, and many programs allow higher ratios with strong credit, reserves or a larger down payment. Program maximums change, so ask your lender.

Lowering your DTI

Pay down or pay off revolving debt, avoid new loans before applying, add a co-borrower's income, or look at a lower price range. For rental properties, lenders may count part of expected rent as income.

The formula

Front-end (housing) ratio
Front-end DTI = Monthly housing paymentGross monthly income × 100
Monthly housing payment
Principal, interest, taxes, insurance and HOA dues
Back-end (total) ratio
Back-end DTI = All monthly debt paymentsGross monthly income × 100
All monthly debt payments
The housing payment plus car, student loan and card minimums, and support payments
Gross monthly income
Income before taxes and deductions
Try it in the Debt-to-Income Ratio Calculator →
Example

Front-end and back-end DTI

A buyer earns $8,000 a month before taxes. The proposed housing payment is $2,200, a car loan is $400 and student loans are $300. Front-end DTI = $2,200 ÷ $8,000 = 27.5%. Back-end DTI = ($2,200 + $400 + $300) ÷ $8,000 = 36.25%.

Debt-to-Income Ratio (DTI) vs. Loan-to-Value Ratio (LTV)

Debt-to-Income Ratio (DTI)

Debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. Lenders use it to decide how large a mortgage payment you can afford.

Loan-to-Value Ratio (LTV)

Loan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.

The differenceDTI compares your debts with your income; LTV compares your loan with the property's value. Lenders check both.

Frequently Asked Questions

Related terms

PITIMortgages & financingPITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.Mortgage Pre-ApprovalMortgages & financingA mortgage pre-approval is a lender's conditional commitment to lend up to a set amount, based on verified income, assets and credit. Sellers often expect one before accepting an offer.MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.Down PaymentMortgages & financingA down payment is the part of a home's purchase price the buyer pays upfront in cash rather than borrowing. It is usually stated as a percentage of the price and is due at closing.Private Mortgage Insurance (PMI)Mortgages & financingPrivate mortgage insurance (PMI) protects the lender, not the borrower, if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20% of the home's value.AmortizationMortgages & financingAmortization is the process of paying off a loan with regular, fixed payments over time. Early payments go mostly to interest; later payments go mostly to principal.RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.FHA 203(k) LoanMortgages & financingAn FHA 203(k) loan is a government-insured mortgage that combines a home's purchase price and the cost of repairs into one loan. It lets owner-occupants buy and fix up homes that need work.

Learn more in the knowledge base

How Much House Can You Afford?Guide · 6 min readThe right price is the one you can pay every month without strain and still keep savings for repairs and emergencies. This guide shows how lenders measure affordability, what they leave out, and how to build a budget that works for you.How to Get Pre-Approved for a MortgageGuide · 7 min readA pre-approval tells you, and the sellers you make offers to, how much a lender is prepared to lend after checking your income, assets and credit. This guide explains how it differs from pre-qualification, what to gather, how to compare lenders and what can change the answer before closing.How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.