What this calculator does
It measures how much of your gross monthly income goes to debt payments, two ways: housing alone, and housing plus everything else you owe.
Mortgage lenders look at these two ratios to judge whether a new payment fits alongside what you already owe. Federal ability-to-repay rules require most mortgage lenders to make a reasonable, good-faith judgment that you can repay the loan, and your debt-to-income (DTI) ratio, or the income left after debts, is one of the factors they must weigh.
Enter a proposed payment to test a home you are considering, or your current rent or mortgage payment to see where you stand today. The results show both ratios against your targets, the dollars of room left under each, and the gross income that would meet both at the payments you entered.
How the math works
Both ratios divide monthly payments by gross monthly income, your annual income before taxes and deductions divided by 12. The front-end ratio counts only the housing payment: principal, interest, property tax, homeowners insurance, mortgage insurance and HOA dues. The back-end ratio adds every other monthly debt payment.
- H
- monthly housing payment
- D
- other monthly debt payments
- I
- gross monthly income: annual income ÷ 12
The front-end ratio is the same with D left out. Room under a target is the target times income, minus the payments that target covers. The income that meets both targets is the larger of H ÷ front-end target and (H + D) ÷ back-end target, times 12.
What counts as debt
Lenders generally count required monthly payments on money you owe, plus court-ordered obligations: car loans and leases, student loans, minimum credit card payments, personal loans, payments on other property, and child support or alimony you pay. Rules for some items vary, such as student loans in deferment or a loan with only a few payments left, so check how a lender treats them.
Living costs are usually left out, even large ones: utilities, phone and internet, groceries, childcare, commuting, and insurance premiums other than homeowners insurance. Taxes withheld from your pay are not counted either, because the ratio already uses income before taxes.
Gross versus take-home income
The ratios use gross income because it is documented and comparable between applicants. Your bills, though, are paid from take-home pay, which is lower after taxes, retirement contributions and benefit deductions. The same payment takes a bigger share of take-home pay than the ratio shows, so a ratio that meets a lender's limit can still feel tight.
What moves the ratios
A ratio falls when payments fall or income rises. Paying off a loan removes its payment entirely; paying down a card lowers its minimum; stretching a loan over more years lowers its payment but usually adds interest. A smaller housing payment lowers both ratios at once. A co-borrower adds income and their debts. Lenders decide which changes count and when, for example whether a debt must be paid off before closing.
Worked example
A buyer earns $72,000 a year and is looking at a home with a $1,650 monthly housing payment, all in. They also pay $320 on a car loan, $180 on student loans and a $75 card minimum. Their targets are 28% and 36%.
Worked example
- Gross monthly income: $72,000 ÷ 12 = $6,000.
- Front-end: $1,650 ÷ $6,000 = 27.5%, under the 28% target ($1,680) by $30 a month.
- Other debts: $320 + $180 + $75 = $575. Total payments: $1,650 + $575 = $2,225.
- Back-end: $2,225 ÷ $6,000 = 37.1%. The 36% target allows $2,160, so payments are $65 a month over.
- Income that meets both: the larger of $1,650 ÷ 0.28 and $2,225 ÷ 0.36, times 12 = $74,167 a year.
Front-end 27.5%, within target. Back-end 37.1%, $65 a month over the 36% target.
The card minimum is the smallest payment, yet without it the back-end ratio would be 35.8%, within the target. The ratio counts payments, not balances, so a small debt that is gone entirely can move it more than a large one paid down partway.
Common mistakes
- Entering balances instead of payments. The ratio uses monthly payments. For cards, that is the minimum due, not the balance.
- Using take-home pay. Lenders divide by gross income. Net pay makes your ratio look higher than the one a lender calculates.
- Counting only principal and interest as housing. Property tax, homeowners insurance, mortgage insurance and HOA dues all belong in the housing payment.
- Leaving out deferred or co-signed debts. Lenders often count them anyway. Find out how yours treats them before relying on the result.
- Reading a target as an approval. Meeting 28/36 does not mean a lender will approve a loan, and missing it does not mean one will refuse.
Limits of this estimate
- The targets are yours. Lenders and loan programs set their own limits and may adjust them for credit, savings and loan type.
- Lenders have rules for which income counts, such as how bonuses, overtime or self-employment earnings are averaged, so their income figure can differ from yours.
- Lenders generally use the payments on your credit report, which may not match your own records.
- It is a snapshot. A payment that changes later, such as a student loan leaving deferment or an adjustable rate resetting, changes the ratio.
- It does not measure whether the payment fits your budget, which also has to cover taxes and living costs.
Frequently asked questions
What is a good debt-to-income ratio?
Lower means more room in your budget and, to a lender, more capacity to take on a payment. The traditional rule of thumb is 28% front-end and 36% back-end, but it is only a guideline. Lenders and loan programs set their own limits, and those can depend on your credit, savings and the type of loan, so there is no single cutoff that applies everywhere.
Is rent part of my debt-to-income ratio?
When you apply for a mortgage, the rent you will stop paying is replaced by the proposed housing payment, so you enter the new payment rather than your rent. If you are not buying yet, you can enter your rent as the housing payment to see where you stand today.
Do utilities, phone bills or insurance count?
Usually not. Utilities, phone and internet, groceries, and car, health or life insurance premiums are living costs, not debt payments, so they are normally left out. The exceptions are homeowners insurance and property tax, which belong in the housing payment.
I pay my credit card in full every month. Does it still count?
Often yes. Many lenders use the minimum payment shown on your credit report for any card with a balance on the statement date, even if you pay it off each month. Ask how your lender handles it; a card with a zero balance usually adds nothing.
Does adding a co-borrower lower the ratio?
It adds their income, but it also adds their debt payments. Whether the ratio falls depends on how their income and debts compare with yours. Enter the combined figures for everyone who would be on the loan.
Does my debt-to-income ratio affect my credit score?
No. Credit scores are built from your credit reports, which do not include your income, so the ratio itself is not part of the score. The amounts you owe, especially card balances compared with their limits, do affect scores.
Next steps: to turn your income and debts into a price range, use the affordability calculator, which carries over the numbers you entered here. To find the housing payment for a specific home, the mortgage payment calculator adds tax, insurance, PMI and HOA dues to principal and interest.