Debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes towards paying your monthly debt payments. Lenders use it to assess borrowing risk.

What is a good DTI ratio?

For mortgages, lenders generally prefer a back-end DTI of 36% or less, though some loan programs allow up to 43% or higher in certain conditions. A DTI below 20% is considered excellent.

How is front-end DTI different from back-end DTI?

Front-end DTI only considers housing-related expenses (like mortgage/rent, property taxes, homeowners insurance). Back-end DTI includes all your monthly debt obligations, including housing costs, plus other debts like car loans, student loans, and credit card payments.

How can I lower my DTI ratio?

You can lower your DTI by increasing your income, reducing your monthly debt payments (e.g., by paying off loans or credit cards), or avoiding new debt.

Debt-to-Income Ratio Calculator

What is a Debt-to-Income Ratio?

Debt-to-income ratio (DTI) is the ratio of total debt payments divided by gross income (before tax) expressed as a percentage, usually on either a monthly or annual basis. As a quick example, if someone's monthly income is $1,000 and they spend $480 on debt each month, their DTI ratio is 48%. If they had no debt, their ratio is 0%.

Why is it Important?

DTI is an important indicator of a person's or a family's debt level. Lenders use this figure to assess the risk of lending to them. A person with a high ratio is seen by lenders as someone that might not be able to repay what they owe. Different lenders have different standards. Theoretically, the lower the ratio, the better.

Types of DTI Ratios:

Front-End Ratio (Housing Ratio): This is your total monthly housing costs (Principal, Interest, Taxes, Insurance - PITI, plus HOA fees if applicable) divided by your gross monthly income. In the U.S., the standard maximum front-end limit used by conventional home mortgage lenders is 28%.

`Front-end DTI = (Monthly Housing Costs / Gross Monthly Income) * 100%`

Back-End Ratio (Total Debt Ratio): This includes all your monthly housing costs plus all other recurring monthly debts (like car loans, student loans, credit card payments) divided by your gross monthly income. In the U.S., the standard maximum limit for the back-end ratio is 36% on conventional home mortgage loans.

`Back-end DTI = (Monthly Housing Costs + Other Monthly Debts / Gross Monthly Income) * 100%`

House Affordability

Lenders use DTI to qualify home-buyers. Normally, the front-end DTI/back-end DTI limits for conventional financing are 28/36, the Federal Housing Administration (FHA) limits are 31/43, and the VA loan limits are 41/41. You can use our House Affordability Calculator to evaluate DTI when determining maximum home mortgage loan amounts.

Financial Health

DTI ratios can also be used to evaluate personal financial health. In the United States, normally, a DTI of 1/3 (33%) or less is considered to be manageable. A DTI of 1/2 (50%) or more is generally considered too high.

How to Lower Debt-to-Income Ratio

Increase Income: Work overtime, get a second job, ask for a raise, or generate income from a hobby.
Budget: Track spending to find areas where expenses can be cut.
Make Debt More Affordable: Refinance high-interest debts or consolidate them.

Lotus Calculator

About Debt-to-Income Ratio Calculator