Loans & debt
Debt-to-income ratio (DTI): Definition, Formula and Example
DTI compares required monthly debt payments with gross monthly income, using a consistent definition of included obligations.
Scope: General financial concept; examples are hypothetical.
Other names and related labels: DTI; Debt service to gross income.
How it works
A housing ratio focuses on housing obligations; a total debt ratio includes other qualifying debt payments. The denominator is usually gross income rather than take-home pay. Loan programs differ in income documentation, included costs and acceptable ratios.
DTI = qualifying monthly debt payments / gross monthly income × 100%
Convert annual, weekly and other payment amounts to the same monthly basis. Do not use outstanding debt balances as the numerator.
$1,800 of debt payments on $6,000 gross monthly income
Assume all listed payments qualify for the total ratio.
- Monthly payment total: $1,400 housing + $400 other debt = $1,800.
- DTI: $1,800/$6,000 × 100% = 30%.
Total DTI is 30% under these definitions.
Gross income, monthly amounts; expenses not included in a lender’s DTI may still affect affordability.
The worked example uses the assumptions above. Related tools may model a different scope; check their descriptions before comparing results.
A ratio is not a lending approval
The same ratio can leave households with very different disposable income. Credit, reserves, interest rates and the loan program also matter. There is no single DTI cutoff that guarantees approval for every lender.
Explore with a calculator
- Debt-to-Income Ratio Calculator
Calculate housing and total ratios using its labeled payment categories.
- House Affordability Calculator
Explore an affordability estimate with explicitly entered ratio assumptions.
Sources and checks
Definition and example arithmetic checked . Sources explain the concepts; numerical examples use the assumptions stated above.
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