Calculate your debt-to-income ratio, a key figure lenders use to assess loan and mortgage eligibility.
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The DTI formula is: DTI % = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100. This includes recurring debt obligations like rent or mortgage, car loans, student loans, and minimum credit card payments, divided by your income before taxes and deductions.
For example, someone with $1,500 in total monthly debt payments and $5,000 in gross monthly income has a DTI of (1,500 ÷ 5,000) × 100 = 30%, comfortably under the 36% general guideline and the 43% cap many mortgage lenders use.
Lenders use DTI as a key indicator of how much additional debt you can reasonably manage. Most conventional mortgage lenders look for a DTI at or below 43%, though requirements vary by lender and loan type, a lower DTI generally improves loan approval odds and terms.
Using net (take-home) income instead of gross income, lenders calculate DTI on gross income, so using net pay makes your ratio look artificially high.
Leaving out a debt because it's small or paid automatically, like a car payment or student loan, every recurring debt obligation counts toward the total.
Including non-debt monthly expenses like groceries, utilities or insurance premiums, these aren't part of the standard DTI formula at all.
Include rent or mortgage payments, car loans, student loans, minimum credit card payments, and any other recurring debt obligations. Don't include expenses like groceries, utilities, or insurance.
Use gross income (before taxes and deductions), which is the standard measure lenders use for DTI calculations.
Generally, 36% or below is considered good, with many mortgage lenders capping approval around 43%. Ratios above that may make loan qualification more difficult.
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