What Is DTI (Debt-to-Income Ratio)?
DTI (Debt-to-Income Ratio) compares your total monthly debt payments to your gross monthly income. Lenders use it to determine how much mortgage you can afford. There are two types: front-end DTI (housing costs only) and back-end DTI (all debts including housing).
Key Facts
- Most lenders want your back-end DTI at or below 43-45%.
- FHA loans may allow DTI up to 50% with compensating factors.
- DTI = Total Monthly Debts ÷ Gross Monthly Income × 100.
- Student loans, car payments, credit cards, and child support all count toward your DTI.
- Paying down existing debt before applying can significantly improve your buying power.
Real-World Example
Gross monthly income: $10,000. Car payment: $450. Student loans: $350. Credit cards: $200. Proposed mortgage (PITI): $4,200. Total debts: $5,200. DTI = 52% — too high for most lenders. Paying off the car and cards brings it to 45.5%.
Why It Matters
DTI is the #1 reason mortgage applications get denied or loan amounts get reduced. Before house shopping, calculate your DTI and consider paying down debts to maximize what you can qualify for.
En Español
El DTI (Relación Deuda-Ingreso) compara tus pagos mensuales totales de deuda con tu ingreso bruto mensual. Los prestamistas lo usan para determinar cuánta hipoteca puedes pagar. Hay dos tipos: DTI frontal (solo costos de vivienda) y DTI posterior (todas las deudas incluyendo vivienda).