Debt-to-Income Ratio — Definition and What It Means for Your Income
The percentage of gross monthly income that goes toward debt payments.
Debt-to-income (DTI) ratio is calculated by dividing total monthly debt payments (student loans, car payments, credit cards, mortgage/rent) by gross monthly income. Lenders use DTI to assess loan eligibility.
Source: Consumer Financial Protection Bureau
Why it matters
DTI is a key factor in mortgage approval and reveals how much of your income is already committed before discretionary spending and savings.
Example
Someone with $6,000/month gross income and $1,800/month in total debt payments (including rent) has a DTI of 30% — generally considered healthy for most lending purposes.
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FAQ
Debt-to-Income Ratio — FAQ
What DTI ratio is needed for a mortgage?
Most lenders prefer a DTI of 43% or lower for mortgage qualification, though some loan programs allow higher ratios under certain conditions.