What your debt-to-income ratio tells a lender
Before a lender approves a mortgage, car loan or other big loan, it wants to know how much of your income is already committed to paying debts. The debt-to-income ratio, often shortened to DTI, answers that with one number. A low ratio says there is room in your budget for a new payment. A high ratio says there is not, however good your credit is.
This calculator gives you both versions lenders use: the front-end ratio, which counts housing only, and the back-end ratio, which counts housing plus every other monthly debt.
The formulas, and what every variable means
gross monthly income = annual gross income ÷ 12
front-end ratio = housing payment ÷ gross monthly income × 100
back-end ratio = (housing payment + all other monthly debt payments) ÷ gross monthly income × 100
| Term | Meaning | What to enter |
|---|---|---|
| Gross income | Pay before tax and deductions | Salary, wages and other regular income a lender would count |
| Housing payment | What you pay each month to live where you live | Rent, or the new mortgage with property tax, insurance and any HOA dues |
| Other debts | Required monthly payments on loans and cards | The minimum payment, not the balance |
| Room left | Extra monthly debt you could add before hitting a limit | Limit × income − your current debt |
| Income needed | Yearly income at which your debts would equal the limit | Total monthly debt × 12 ÷ limit |
Note that the ratio uses the minimum payment on each debt, not what you owe. A large balance with a small payment counts for less than a small balance with a large payment.
Worked example 1, by hand: $72,000 a year
Housing $1,500 a month, a car loan of $350, a student loan of $250 and $100 of credit card minimums.
- Gross monthly income: $72,000 ÷ 12 = $6,000.00.
- Front-end ratio: $1,500 ÷ $6,000.00 = 25.0%.
- Total monthly debt: $1,500 + $350 + $250 + $100 = $2,200.
- Back-end ratio: $2,200 ÷ $6,000.00 = 36.7%.
A back-end ratio of 36.7% is in the middle band: above 36%, which is Fannie Mae's maximum for manually underwritten loans, and below 45%, the most it allows on those loans when the borrower meets its credit score and reserve requirements. Many lenders would still consider this applicant, but with less room than someone at 30%.
Worked example 2: which debt should you pay off first?
The same borrower, removing one payment at a time:
| Pay off | Payment removed | New back-end ratio |
|---|---|---|
| Nothing (today) | - | 36.7% |
| the credit card | $100 | 35.0% |
| the car loan | $350 | 30.8% |
| the student loan | $250 | 32.5% |
Clearing the smallest payment, the $100 card, is enough to bring the ratio to 35.0%, under 36%. Clearing the car loan lowers it more, to 30.8%, but usually takes more money. For a lender, what matters is the monthly payment removed, not the size of the balance. Paying off a debt with a small payment and a large interest rate, like a card, often helps both your ratio and your finances.
Worked example 3: raise income, or cut debt?
Total monthly debt is $2,200. To reach a 36% ratio at that debt level you would need to earn $73,333 a year ($2,200 × 12 ÷ 0.36), which is $1,333 more than now. To reach 45% you would need only $58,667, and at $72,000 you are already under that mark. Raising income by that much is hard. Cutting a payment of a few hundred dollars is often faster.
Worked example 4: how buying changes the picture
The borrower above pays $1,500 in rent, so the ratio is 36.7%. Suppose they apply for a home whose new payment, with property tax and insurance, is $2,400 a month.
| Renting | With the new mortgage | |
|---|---|---|
| Housing payment | $1,500 | $2,400 |
| Front-end ratio | 25.0% | 40.0% |
| Back-end ratio | 36.7% | 51.7% |
Lenders judge the new payment, not the rent, so the borrower's ratio jumps to 51.7%, in the range where approval becomes hard. Before you fall in love with a house, test the payment here. To see what price a payment supports, use the home price from monthly payment calculator or the house affordability calculator.
Why a low ratio is not the same as being comfortable
- The ratio uses gross income, but you pay your bills from take-home pay.
- It leaves out food, utilities, insurance, childcare, fuel and everything else you spend.
- It looks at minimum payments, so paying only the minimum can hide how long a debt will last.
- Lenders' limits are the most they will lend, not the most that is wise.
Common mistakes to avoid
- Using take-home pay. Enter gross income, or the ratio will look worse than a lender sees it.
- Leaving out debts. Lenders see everything on your credit report, so include every payment.
- Using the balance instead of the payment. Only the monthly payment counts.
- Forgetting tax and insurance in the new housing payment. Lenders include them.
- Opening new credit just before applying. A new loan adds a payment and can change the answer.
Sources and review
The ratio is your monthly debt payments divided by your gross monthly income, which is how the CFPB defines it (What is a debt-to-income ratio?). The band edges of 36%, 45% and 50% are the maximums in the Fannie Mae Selling Guide, section B3-6-02. Other lenders and loan types, such as FHA and VA loans, set their own limits, and limits change over time. Last reviewed September 2026. Read about our methodology.