The debt-to-income formula
Your debt-to-income ratio compares what you owe each month to what you earn before tax:
DTI = total monthly debt payments ÷ gross monthly income × 100
"Gross" means before taxes and deductions. Lenders count required payments — housing, car loans, student loans, credit-card minimums and other loans — but usually not utilities, groceries or insurance.
Worked example
Debts of $1,500 housing + $400 car + $200 cards + $150 other = $2,250, on $6,000 gross income:
Total debt: 1,500 + 400 + 200 + 150 = $2,250/month.
DTI: 2,250 ÷ 6,000 × 100 = 37.5%.
Verdict: below the common 43% ceiling — generally acceptable.
What lenders look for
Many mortgage lenders prefer a back-end DTI at or below 36%, and the qualified-mortgage rule has historically used 43% as an upper bound, though some loans allow more. A lower DTI means more room in your budget and usually better loan terms. The "front-end" ratio looks at housing costs alone, typically capped near 28%.
Tip: to lower your DTI, pay down high-balance revolving debt or increase income — both move the ratio quickly. This estimate is educational and not a lending decision.