Calculating Your Debt-to-Income Ratio for a U.S. Mortgage

Question

How do I calculate my debt-to-income ratio?

Answer

When you’re ready to apply for a home loan, lenders zero in on your debt-to-income (DTI) ratio to gauge your ability to handle new mortgage payments. This simple percentage compares your monthly debts against your gross (pre-tax) income, helping lenders decide how much you can safely borrow.

Step 1: Total Your Monthly Debt Payments
Start by adding up all recurring obligations, including:

Mortgage or rent payments (if you’re refinancing or own multiple properties)
Auto loans and leases
Minimum credit card payments
Student loans
Child support or alimony
Any other fixed debts (e.g., personal loans, HELOCs)

Step 2: Calculate Your Gross Monthly Income
Include reliable, documented income sources such as:

Base salary or hourly wages (pre-tax)
Regular overtime, bonuses or commissions (averaged over the last 12 months)
Self-employment or rental income (net profit after expenses)
Social Security or retirement benefits (if they count toward your qualifying income)

Step 3: Do the Math
Use this formula:

DTI = ( Total Monthly Debt ÷ Gross Monthly Income ) × 100

For example, if your debts total $2,000 and your gross income is $6,000, your DTI is (2,000 ÷ 6,000) × 100 = 33%.

Front-End vs. Back-End Ratios
Some lenders look at two DTI measurements:

Front-end DTI: Housing costs alone (principal, interest, taxes, insurance) ÷ income
Back-end DTI: All monthly debts ÷ income (this is the number most lenders emphasize)

Many conventional loans cap your back-end DTI around 43%, though some programs allow up to 50% under special guidelines.

It’s advisable to aim for a back-end DTI below 36% and a front-end DTI under 28% to improve your chances of approval and secure better interest rates.

Before submitting a mortgage application, buyers are recommended to verify the exact DTI requirements with their lender or mortgage broker. And, if you have any questions about qualifying income or which debts count, it’s advisable to consult a licensed mortgage professional or attorney.