The short version
Add up every required monthly debt payment — rent or mortgage (PITI + HOA), car loans, credit-card minimums, student loans, child support — then divide by your gross monthly income (before taxes) and multiply by 100. That's your back-end debt-to-income ratio. Under 36% keeps most lenders comfortable; over 43% shuts most mortgage doors.
Step 1: find your gross monthly income
Lenders use gross income — before taxes, Social Security, or 401(k) deductions. If you're salaried, divide your annual salary by 12. If you're hourly, multiply your hourly rate by average weekly hours, then by 4.333 (52 ÷ 12). Include bonuses and side income only if they're steady — a lender won't count a one-time bonus, so don't either.
The most common mistake here: using take-home pay. On a $90,000 salary, take-home might be $5,600 a month while gross is $7,500 — computing DTI on take-home makes your ratio look 34% worse than a lender would read it.
Step 2: list every required payment
Write down the minimum required monthly payment for each debt — not the balance, not what you actually pay:
- Housing: rent, or mortgage principal + interest + property taxes + homeowners insurance + HOA
- Auto: car loans and leases (not insurance, gas, or maintenance)
- Credit cards: minimum payments only — a card you pay in full each month counts as $0
- Student loans: the required monthly payment, even on income-driven plans
- Other: child support, alimony, personal loans, payment plans
Leave out utilities, subscriptions, groceries, insurance premiums, and taxes withheld — those aren't debts, and lenders don't count them. (That's also why two households with identical DTIs can feel very different — DTI doesn't see the $400 electric bill.)
Step 3: do the division
DTI = total monthly debt payments ÷ gross monthly income × 100. While you're at it, compute the front-end ratio too: housing payment ÷ gross income × 100. Lenders read both — the classic mortgage target is 28% front-end / 36% back-end.
Worked example: 37.9%
Maya earns $7,500/month gross. Her minimums: housing $1,900, auto $420, credit cards $160, student loans $310, other $50 — total $2,840. Her DTI is 2,840 ÷ 7,500 × 100 = 37.9%; her front-end ratio is 1,900 ÷ 7,500 = 25.3%. The housing half passes the 28% test — it's the car and student loans that push her just past the 36% line. Run your own numbers in the debt-to-income ratio calculator — it computes both ratios and your room at the 36% and 43% lines.
What the bands mean
Under 20% — excellent. Lenders compete for you; you have real room for new debt if you want it. 20–36% — the green zone. Manageable, and most lenders comfortable. 36–43% — the caution zone. Some loans still approve (especially with strong credit), but rates, scrutiny, and margin for error all get worse. 43–50% — lender ceiling. Conventional mortgages mostly stop here; you need FHA/VA exceptions or a much stronger file. Over 50% — red line. Half your gross income is spoken for before you buy groceries. Approval odds are thin everywhere, and the cash-flow risk is yours whether you borrow or not.
Five ways to lower your DTI
1. Kill a whole payment, not just balances. DTI counts payments, not balances. Wiping out a $310/month student loan moves the ratio more than $310 off a credit card — kill entire minimums first.
2. Refinance to a smaller payment. Extending a car loan or refinancing a mortgage drops the monthly minimum (you'll pay more interest overall, but DTI improves immediately).
3. Raise the denominator. A raise, overtime, or steady side income shrinks the ratio without touching the debts. Use gross, and keep it realistic — lenders average variable income.
4. Don't open new credit before you apply. A new car payment six months before a mortgage application can push a 38% DTI past 43% and kill the approval. Freeze new borrowing until after closing.
5. Attack by payoff order. Compare strategies in the debt payoff comparison — avalanche (highest rate first) usually wins on interest, but if you're racing a DTI deadline, the loan with the biggest monthly payment per dollar owed goes first.
Frequently asked questions
Is a 36% DTI too high?
It's the edge of comfortable, not a wall. Most lenders approve mortgages up to about 43–45% back-end DTI, and some FHA loans stretch further. But 36% is the conservative line that leaves real breathing room — above it, every unexpected bill lands on credit.
What counts as debt in DTI?
Required monthly payments: housing (PITI + HOA), auto loans, credit-card minimums, student loans, child support, alimony, personal loans. Not counted: utilities, insurance, taxes, subscriptions, groceries, or anything discretionary.
Can I get a mortgage with 45% DTI?
Sometimes — conventional lenders generally cap at 45% with strong credit and reserves, FHA allows higher with compensating factors. But qualifying at 45% leaves almost no margin: one job loss or one emergency, and the math breaks.
Does DTI affect my credit score?
Not directly. Credit scores look at balances vs limits (utilization) and payment history, not income. But high DTI usually travels with high utilization, and lenders read both — so a great score with a bad DTI still gets declined.
Should I include my spouse's debts?
If you're applying jointly, yes — joint applications combine both incomes and both debts. If you're applying solo, only your debts count, but only your income does too.