Debt-to-income ratio calculator and formula
Your debt-to-income ratio is total monthly debt payments divided by gross monthly income. Debts of $2,400.17 a month against gross pay of $7,500 give a DTI of 32.00 percent. Most US mortgage lenders stop near 43 percent, which leaves $824.83 a month of room here.
Debt-to-income ratio (back-end)
32.00%
$2,400.17 of monthly payments against $7,500.00 of gross pay.
- Front-end ratio, housing only
- 21.07%
- Total monthly debt payments
- $2,400.17
- Ceiling at 43%
- $3,225.00
- Room left each month
- $824.83
Mortgage or rent, plus property tax, insurance and any association dues, escrowed or not.
Before tax and deductions, which is what a lender uses.
The formula
Above the line goes every payment you are required to make each month. Below it goes gross pay, before tax and deductions. The division gives a decimal, so multiply by for the percentage a lender quotes.
What this calculator works out
Enter the monthly payment on your home, your car loans, your student loans and the minimum due on your cards, then your gross monthly income. It returns the back-end ratio a lender quotes, the front-end housing ratio underneath it, and how much monthly debt you could add before you reach the limit you picked.
The numbers it opens with are the first worked example below: $2,400.17 of monthly debt against $7,500 of gross pay is a DTI of 32.00 percent, with $824.83 a month of room under a 43 percent limit. Change any line and every figure moves with it.
Front-end against back-end
Two different ratios share the name DTI, and most pages quote one without saying which.
The front-end ratio counts housing only: mortgage principal and interest, plus property tax, insurance and any association dues, whether or not they are escrowed with the loan payment. On the numbers above that is $1,580.17 against $7,500, or 21.07 percent.
The back-end ratio counts housing plus every other required monthly payment. Same income, $2,400.17 of debt, 32.00 percent. When a lender says your DTI without qualifying it, this is the one meant, and it is the one the limits below apply to.
A rule of thumb still quoted in underwriting is 28 and 36: housing under 28 percent, everything under 36 percent. Plenty of approvals sit above both, but the pair is a useful check because it separates a housing problem from a consumer debt problem. If the front-end ratio is comfortable and the back-end ratio is not, the mortgage is not the thing standing in your way.
What counts as a monthly debt payment
The ratio counts payments, not balances. A card with a small minimum and a large balance barely moves your DTI. The end of a term cuts the other way: the US agency rules behind most mortgages let an underwriter leave out a car or personal loan with ten or fewer payments remaining, so a loan two payments from the end can drop out of the ratio before it is actually paid off. A car lease is the exception and counts in full however few months are left to run, because a lease that ends is usually replaced by another one.
Counted: rent or the proposed mortgage payment with tax and insurance, car loans and leases, student loans, personal loans, card minimums, court-ordered support, and any loan you co-signed, because you are liable for it.
Not counted: utilities, groceries, phone bills, car and health insurance, tax withheld from pay, pension contributions and subscriptions. They are real costs and they are not debt service, so a lender's ratio ignores them.
Student loans in deferment are the line people leave out most often. A payment of zero today is not a payment of zero in underwriting: a lender will use the documented payment, or a set percentage of the balance when there is no payment to document. Dropping the $220 student loan line from the example above is the difference between a number you like and the number the lender computes.
The limits, and what room left means
Lenders work to a ceiling, and the ceilings below are United States ones. Pick 36 percent for a conservative rule of thumb, 43 percent for the figure most often quoted as the edge of a mainstream mortgage, or 50 percent for what automated underwriting sometimes allows when the rest of the file is strong: a large down payment, months of reserves, a long credit history. Other countries set the limit somewhere else or test what you can afford a different way, so the ratio travels but the ceiling does not.
Room left is that ceiling minus what you already owe each month. At 43 percent of $7,500 the ceiling is $3,225.00, and $2,400.17 of it is already committed, so $824.83 a month is free. That is the figure to check before signing up for anything new, because a car payment is never judged on its own: it is judged on what it does to this ratio.
It works in the other direction too. A smaller housing payment is the quickest route down for most applicants, and the loan payment calculator shows what a given loan size and term cost each month. A bigger down payment shrinks the loan behind it, and the savings goal calculator works out the monthly saving that gets you there.
Worked examples
Back-end DTI on \$7,500 a month
Your housing payment is $1,580.17, the car loan takes $450, student loans take $220 and card minimums take $150. Gross pay is $7,500 a month. What is your DTI, and how much room is left under a 43 percent limit?
- Add the required monthly payments: $1,580.17 + $450 + $220 + $150 = $2,400.17.
- Divide by gross monthly income: .
- Multiply by 100 to read it as a percentage: 32.00 percent.
- Find the ceiling at the limit: $3,225.00 of monthly debt.
- Take the debts off the ceiling: $3,225.00 minus $2,400.17 = $824.83.
The DTI is 32.00 percent. At a 43 percent limit the ceiling is $3,225.00 of monthly payments, so there is $824.83 a month of room left, which is what a new loan would have to fit inside.
The front-end ratio, housing only
Same $7,500 of gross pay, but count only the housing payment of $1,580.17. What is the front-end ratio, and how much of a 43 percent ceiling does housing use up on its own?
- Front-end counts one line: housing at $1,580.17.
- Divide by gross monthly income: .
- Multiply by 100: 21.07 percent, against 32.00 percent for the back-end ratio on the same pay.
- The ceiling is unchanged at $3,225.00, so housing leaves $3,225.00 minus $1,580.17 = $1,644.83.
Housing alone is 21.07 percent of gross pay, and the full picture is 32.00 percent. Housing leaves $1,644.83 a month under the $3,225.00 ceiling, and the car, student and card payments take just under half of it. Quote one ratio without naming it and you are describing a different applicant.
The same debts against take-home pay
Nothing changes but the income line: you use take-home pay of $5,700 rather than $7,500 of gross pay. What do the same debts of $2,400.17 look like?
- The payments are unchanged: $2,400.17 a month.
- Divide by take-home pay instead: .
- Multiply by 100: 42.11 percent, against 32.00 percent on gross pay.
- A 43 percent ceiling on take-home pay would be $2,451.00, leaving $50.83.
The same debts read as 42.11 percent on take-home pay and 32.00 percent on gross, a gap of about 10 points. Room left falls from $824.83 to $50.83. Nothing about the file changed, only the line you divided by, and it is enough to talk someone out of an application a lender would have taken.
The mistake that makes a good file look bad
Dividing by take-home pay.
Gross monthly income is the bottom line of this ratio: pay before tax, pension contributions and everything else deducted at source. Use what actually lands in your account and the same debts read far worse. In the third example, $2,400.17 against $5,700 of take-home pay is 42.11 percent, while against $7,500 of gross pay it is 32.00 percent, and room left goes from $824.83 to $50.83.
The error also runs the other way, which is worse because it flatters you. Leaving out the debts that do not feel like debts, a student loan in deferment, a card whose balance you usually clear but which still reports a minimum, a loan you co-signed for a relative, gives you a number the lender will not reproduce. Pull your credit report and count every line that carries a required monthly payment, including the ones you had stopped thinking about.
Common questions
Is DTI worked out on gross pay or take-home pay?
Gross, meaning pay before tax, pension and other deductions. That is what mainstream lenders use, so a ratio built on take-home pay will not match the one on your application. If you are self-employed, gross means the income your tax returns support, usually averaged over two years, not turnover.
Does my rent count if I am applying for a mortgage?
Your current rent drops out and the proposed housing payment replaces it: principal, interest, property tax, insurance and any association dues. That is why the first field is a housing payment rather than rent, and why the front-end ratio is worth reading on its own.
What lowers the ratio fastest?
Clearing a debt whose payment is large relative to its balance, because the ratio counts payments. Chipping at a card moves it slowly, since the minimum only falls as the balance does, while finishing a car loan takes its $450 straight off the top line. Raising documented gross income works on the bottom line and counts just as much.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.