Debt-to-income ratio compares qualifying monthly debt obligations with gross monthly income. Lenders use it as one measure of a borrower’s capacity to manage a proposed mortgage payment.
Basic Formula
Monthly qualifying debts divided by gross monthly income equals DTI. Example: $3,800 of qualifying monthly debt divided by $10,000 of gross monthly income equals a 38% DTI.
What May Be Included?
- Proposed housing payment
- Property taxes
- Homeowners insurance
- Mortgage insurance
- HOA or condominium fees
- Auto loans
- Student loans
- Credit card minimum payments
- Installment debts
- Other qualifying obligations
There Is No Single Universal Maximum
Different mortgage programs and lenders may use different requirements, and automated underwriting systems may evaluate multiple risk factors together.
Approval vs. Comfort
A qualifying DTI is not a complete household budget. Childcare, commuting, health costs, retirement goals, and other expenses may affect what feels comfortable even when they are not all part of the mortgage underwriting ratio.
Sources
CFPB: Debt-to-Income Ratio
Fannie Mae: Why Understanding Debt Is Essential