A debttoincome ratio is a personal finance measure that compares the amount of debt you have to your overall income. Lenders, including mortgage lenders, use the debttoincome ratio as a way to measure your ability to manage the payments you make each month and your ability to repay the money you have borrowed.
The debttoincome ratio is calculated by dividing your total recurring monthly debt by your gross monthly income and is expressed as a percentage. For example, if you pay $1,000 for your mortgage, $500 for your car and $500 for the rest of your debt each month, your total recurring monthly debt would equal $2,000 ($1,000 + $500 + $500). If your gross monthly income is $6,000, your debttoincome ratio would be $2,000 / $6,000 = 0.33, or 33%. If you had the same recurring monthly debt but your gross income was $8,000, your debttoincome ratio would be $2,000/ $8,000 = 0.25, or 25%.
When you apply for a mortgage, the lender will consider your finances, including your credit history, monthly gross income and how much money you have for a down payment. To figure out how much you can afford for a house, the lender will look at your debttoincome ratio. A low debttoincome ratio demonstrates a good balance between debt and income. Lenders prefer to see a debttoincome ratio smaller than 36%, with no more than 28% of that debt going towards servicing your mortgage. For example, assume your gross income is $4,000 per month. The maximum amount for monthly mortgagerelated payments at 28% would be $1,120 ($4,000 X 0.28 = $1,120). Your lender will also look at your total debts, which should not exceed 36%, or in this case, $1,440 ($4,000 X 0.36 = $1,440). These are the figures your lender will look at to determine the size of the loan for which you can reasonably afford.
In most cases, 43% is the highest ratio you can have and still get a qualified mortgage. Above that, the lender will likely deny the loan application because your monthly expenses for housing and various debts are too high as compared to your income.

What's considered to be a good debttoincome (DTI) ratio?
Your debttoincome ratio helps lenders determine your credit worthiness. Find out how to calculate your score and whether ... Read Answer >> 
How do I lower my debttoincome (DTI) ratio?
A debttoincome ratio is a personal finance measure that compares the amount of debt you have to your overall income. Lenders ... Read Answer >> 
What counts as "debts" and "income" when calculating my debttoincome (DTI) ratio?
It's important to know your debttoincome ratio because it's the figure lenders use to measure your ability to repay the ... Read Answer >> 
What are the differences between balancetolimit ratio and debttoincome ratio?
Learn how to differentiate between your balancetolimit ratio and your debttoincome ratio, how they are calculated, and ... Read Answer >>

Personal Finance
Too Much Debt For a Mortgage?
Just because a lender is willing to offer you a loan doesn't mean you should take it. 
Personal Finance
Whatâ€™s Considered To Be A Good DebtToIncome (DTI) Ratio?
The debttoincome ratio measures the amount of debt a person has compared to overall income. 
Personal Finance
5 Ways to Up Your Chance of Getting a Mortgage
Tips and ways to improve your chances of getting a mortgage. 
Personal Finance
Calculating DebtToIncome Ratio (DTI)
The debttoincome ratio measures the percentage of a personâ€™s debt when compared to his overall income. 
Investing
What to Consider When You Finance a Home
These are the many factors that need to be considered when obtaining financing for a home. 
Personal Finance
Mortgages: How Much Can You Afford?
Answering this means numbercrunching as well as factoring in other considerations and expenses. 
Personal Finance
5 Steps To Qualify For A Mortgage If You're SelfEmployed
Qualifying for a mortgage is a little more complicated for borrowers who are selfemployed. 
Investing
Are You Ready To Buy A House?
There are a number of factors, aside from cost, that you should think about before buying a new house. 
Investing
Mortgages: How Much Can You Afford?
The cost of a home is the single largest expense most people ever face. Prior to taking on such an enormous debt, itâ€™s best to do the math.

Qualification Ratio
Ratio of debt to income and housing expense to income that is ... 
DebtToIncome Ratio  DTI
A personal finance measure that compares an individual's debt ... 
NoRatio Mortgage
A mortgage program in which a borrower's income isn't used or ... 
Total Debt Service Ratio  TDS
A debt service measure that financial lenders use as a rule of ... 
FrontEnd DebttoIncome Ratio  DTI
A variation of the debttoincome ratio (DTI) that calculates ... 
BackEnd Ratio
A ratio that indicates what portion of a person's monthly income ...