Quick Answer: How to Calculate Debt-to-Income Ratio
To calculate your Debt-to-Income (DTI) ratio for a mortgage, add up all your minimum monthly debt payments (including your future mortgage payment) and divide that total by your gross monthly income (your income before taxes). Multiply the result by 100 to get your DTI percentage. Lenders typically look for a DTI under 36%.
The Full Calculation: Doing the Math
Lenders use your DTI to determine if you can realistically afford to take on a massive loan. Let's run a real-world calculation.
Step 1: Calculate Your Gross Monthly Income
If you make $84,000 a year, divide by 12. Your gross monthly income is $7,000.
Step 2: Add Up All Monthly Debt Payments
Only include debts that show up on your credit report, plus your proposed new housing payment. Do not include groceries, utilities, or phone bills.
- Auto Loan: $350
- Student Loans: $250
- Credit Card Minimums: $100
- Proposed Mortgage (PITI): $2,000
- Total Monthly Debt: $2,700
Step 3: Divide and Convert to Percentage
Divide $2,700 by $7,000. You get 0.385. Multiply by 100 to get 38.5%. Your DTI is 38.5%.
What Affects This Number?
Your DTI is the ultimate gatekeeper to getting a mortgage. It is affected by:
- Front-End vs. Back-End DTI: Lenders look at two numbers. The Front-End ratio only looks at your housing payment compared to your income (ideal is under 28%). The Back-End ratio looks at all debts combined (ideal is under 36%).
- Variable Income: If part of your income is from bonuses, overtime, or freelance work, lenders will usually average it over the past two years. If it's declining, they may not count it, which artificially spikes your DTI.
- Co-Borrowers: Adding a spouse or partner to the loan combines both your incomes and both your debts, which can dramatically alter the DTI percentage.
How to Lower Your Payment & DTI
If your DTI is too high to get approved (e.g., over 43%), you must lower it before applying:
- Pay Off Small Debts: Paying off a $3,000 credit card balance to eliminate a $100 monthly minimum payment instantly improves your DTI.
- Increase Your Down Payment: A larger down payment results in a smaller loan, which results in a smaller monthly mortgage payment, lowering your front-end DTI.
- Get a Co-Signer: Adding someone with high income and low debt to the loan will pull the average DTI down.
Use Our Free Calculator
Don't want to do the math by hand? Use our specialized Debt-to-Income calculator to instantly see your Front-End and Back-End ratios.
Check Your DTI Instantly
Find out exactly how a lender views your financial profile.
Calculate My DTI Ratio →Frequently Asked Questions
What is the maximum DTI allowed for a mortgage?
For most conventional loans, the absolute maximum DTI is 45% to 50%, though 36% is preferred. FHA loans are more lenient and sometimes allow a DTI up to 57% with compensating factors.
Do lenders look at gross or net income?
Mortgage lenders strictly use your gross income (your income before taxes, 401k deductions, and health insurance premiums are taken out).
Are utility bills included in DTI?
No. Your gas, electric, water, cell phone, and grocery bills are not considered debts and are not included in your DTI calculation.