Calculate DTI by dividing total required monthly debt payments by gross monthly income, then multiply by 100. If your required debts total $1,800 and gross monthly income is $6,000, your DTI is 30%: $1,800 ÷ $6,000 × 100.

Use gross income before taxes and deductions because that is the convention most lenders follow. For annual salary, divide by 12. If income varies, a lender may average documented earnings over a longer period rather than rely on one strong month.

Include payments that appear as recurring credit obligations: mortgage or rent when relevant, auto loans, student loans, personal loans, credit-card minimums, court-ordered obligations, and payments on other financed property. Do not usually include groceries, utilities, phone bills, subscriptions, insurance premiums, or retirement contributions in the lending ratio, even though those costs still matter to your personal budget.

There are two common versions. Front-end DTI considers the proposed housing payment divided by income. Back-end DTI adds housing to other monthly debt. When people say DTI without qualification, they often mean the back-end figure.

Imagine gross monthly income of $7,500, a $450 car payment, a $250 student-loan payment, and $100 in credit-card minimums. Existing debt totals $800. If a proposed mortgage, property tax, and insurance payment is $1,900, total obligations become $2,700. The back-end DTI is 36%.

If the car loan is paid off before applying, total obligations fall to $2,250 and DTI falls to 30%. That does not automatically guarantee approval or mean the household should spend more, but it shows why eliminating a monthly obligation can increase borrowing capacity.

Many planning examples reference 28% for housing and 36% for all debts, but actual limits vary by loan program, credit profile, cash reserves, down payment, and lender. Approval at a higher ratio does not prove a payment will feel comfortable after taxes, childcare, healthcare, saving, and irregular expenses.

Use the home affordability calculator to see how income, existing debts, rates, and down payment influence an estimated home price. To improve DTI, reduce required monthly debt, avoid new borrowing before an application, increase stable documented income, or choose a lower housing payment.

Checking DTI before shopping for a loan can also prevent repeated applications for payments that strain the budget. Recalculate after paying off an account, changing jobs, or receiving a documented raise. When checking your own ratio, use the required minimum payment shown on each statement rather than the current account balance. Then verify your list against a credit report, because forgotten accounts can change the result. If a loan will be paid off soon, ask the lender how it treats that obligation instead of assuming it will be excluded. Keep records for variable income, bonuses, or self-employment earnings, since qualifying income may differ from the amount that arrives in a typical month.

• List minimum required debt payments.
• Convert gross annual income to a monthly amount.
• Divide debt by income and multiply by 100.
• Compare the ratio with your full household budget.