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What Is Debt-to-Income Ratio (DTI)?
DTI is the percentage of your gross monthly income that goes toward debt payments, and lenders use it to decide how much you can borrow.
DTI comes in two flavors. Front-end DTI counts only housing costs against income. Back-end DTI counts every debt payment: housing, car loans, student loans, minimum credit card payments, all of it.
Most mortgage lenders want back-end DTI under 43%, though some loan programs allow higher with compensating factors like a large down payment or strong credit.
DTI is not the same as budgeting. You can have a low DTI and still feel squeezed every month if your remaining income is eaten up by non-debt expenses like childcare or insurance. DTI measures what a lender sees, not your actual cash flow.