Credit & Qualifying
What is a debt-to-income ratio and why does it matter?
The short answer
Your debt-to-income ratio (DTI) is your total monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders use it to judge whether you can afford a new mortgage payment. Many follow a rough guideline where housing costs stay near 28% of gross income and total debts near 36%, though limits vary by loan program. A lower DTI generally improves your approval odds and terms.
Key points
- DTI = monthly debt payments ÷ gross monthly income.
- Common guideline: ~28% housing, ~36% total debt.
- Limits vary by loan type and lender.
- Lower DTI improves approval odds and pricing.
Front-end vs. back-end
The front-end ratio counts only housing costs; the back-end ratio counts all recurring debt including the mortgage. Lenders look at both. CandidCost’s Affordability Calculator builds a DTI worksheet so you can see your numbers.
Put this to work
Sources
Every claim above traces to a public government source.
- ViewT1What is a debt-to-income ratio?
Consumer Financial Protection Bureau · Government / primary · 2024