What is debt-to-income ratio and why does it matter when buying a house?
Learn how lenders compare monthly debt obligations with gross monthly income.
Debt-to-income ratio, or DTI, compares monthly debt payments with gross monthly income before taxes and other deductions.
Lenders use it as one part of evaluating whether a proposed mortgage payment fits alongside existing obligations.
There is no single universal DTI maximum for every mortgage; loan programs, lenders and borrower circumstances vary.
How the calculation works
Add the monthly debt obligations counted by the lender, divide that amount by gross monthly income, and express the result as a percentage. The lender determines which obligations and income can be used under the applicable rules.
A simple example
If counted monthly debts total $2,000 and gross monthly income is $6,000, the example DTI is about 33%. This illustration is not an approval threshold or mortgage decision.
Why dti is not the whole decision
Credit, assets, savings, income documentation, the property, loan program and other underwriting information may also matter. Personal comfort can be more conservative than a lender’s calculation.
What can change the ratio
- The proposed housing payment
- Auto, student, credit-card and other counted obligations
- Verified gross income
- Loan-program treatment of particular debts or income
Organize debt alongside the rest of your situation
Buyer Checkpoint helps organize factors that may shape a homebuying conversation, including down-payment thinking, timeline, credit range, income stability, lender status and other readiness factors.
Buyer Checkpoint is informational and is not a mortgage application, preapproval, underwriting decision or guarantee of financing.