What Is Debt-to-Income Ratio (DTI)?

Your debt-to-income ratio (DTI) is the percentage of your gross monthly income spent on recurring debt payments. Lenders use DTI to determine whether you can comfortably afford a mortgage on top of your existing obligations.

If you earn $7,000 per month gross and your total debts — including the proposed mortgage, car loan, student loans, and minimum credit card payments — equal $2,800, your DTI is 40%. Most conventional loans cap DTI at 45%–50%, while FHA loans allow up to 57% with strong compensating factors. Lowering your DTI before applying can unlock better rates and higher loan amounts.

Key Facts

• Formula: Total monthly debt payments ÷ gross monthly income × 100
• Conventional cap: Typically 45%, up to 50% with strong credit and reserves
• FHA cap: Generally 43%, but may go to 57% with compensating factors
• VA loans: No official DTI cap, though 41% is the benchmark most lenders use
• Front-end ratio: Housing costs alone should generally stay below 28%–31% of gross income

Frequently Asked Questions

What counts as debt for DTI?

Lenders count your proposed mortgage payment (principal, interest, taxes, insurance), car loans, student loans, minimum credit card payments, personal loans, and child support or alimony. They do not count utilities, groceries, subscriptions, or insurance premiums outside of homeowner’s insurance in escrow.

How do I lower my DTI quickly?

Pay down or pay off small revolving balances, avoid taking on new debt, and consider paying off an installment loan with fewer than 10 payments remaining. Increasing your income — such as documenting a raise or adding a co-borrower — also brings DTI down.