Debt-to-income ratio (DTI) is the share of gross monthly income already committed to debt payments — rent or mortgage, car loans, student loans, minimum credit card payments — before a lender even considers a new loan. It is one of the first numbers a mortgage or auto lender checks, and it is nothing more than a sum divided by a total.
$1,850 in monthly debts against $6,200 gross monthly income is a 29.8% DTI.
The example
Three applicants with different debt loads and incomes.
| A | B | C | D | |
|---|---|---|---|---|
| 1 | Applicant | Total monthly debts | Gross monthly income | DTI |
| 2 | Applicant 1 | 1850 | 6200 | 29.8% |
| 3 | Applicant 2 | 2400 | 7800 | 30.8% |
| 4 | Applicant 3 | 900 | 3500 | 25.7% |
The formula
Total debts, divided by gross income:
How it works
The formula itself is one division; the discipline is in what counts as a debt:
- Total every recurring monthly debt obligation — minimum credit card payments, auto loans, student loans, existing mortgage or rent, personal loans — with
SUM(). - Divide that total by gross (pre-tax) monthly income, not take-home pay — lenders standardize on gross income specifically so the ratio is comparable across applicants with different tax situations.
- Format the result as a percentage. Most conventional mortgage lenders look for a DTI at or below roughly 43%, though the exact threshold varies by loan type and lender.
Recalculate DTI including the new loan's estimated payment (front-end plus back-end DTI) before assuming a debt load qualifies — this formula shows current DTI, not DTI after the new obligation is added.
Try it: interactive demo
Enter total monthly debt payments and gross monthly income.
Variations
Include the new loan payment (back-end DTI after the loan)
Add the estimated new payment to the debt total before dividing, to see the DTI a lender will actually evaluate the application against.
Front-end ratio (housing costs only)
Lenders also check a narrower front-end ratio counting only housing costs (mortgage/rent, taxes, insurance) against income, separate from the full back-end DTI.
Pitfalls & errors
Do not include monthly expenses that are not debt obligations — groceries, utilities, subscriptions and insurance premiums are real monthly costs but are not part of a standard DTI calculation, and including them will overstate the ratio.
Use gross income consistently across every applicant being compared. Mixing one applicant's gross figure with another's net figure (even by accident) makes their DTI numbers look comparable when they are not.
If gross monthly income is ever entered as annual income by mistake, the ratio will be off by roughly a factor of 12 and look implausibly low — a sanity-check IF flagging any DTI under 2% is a cheap way to catch that input error.
Practice workbook
Frequently asked questions
What DTI is considered good?
Does DTI include the mortgage being applied for?
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