September 8, 2025

What is a Debt-to-Income Ratio (DTI)?

Your debt-to-income ratio (DTI) is the number lenders use to determine how much house you can afford. It compares your monthly debts to your income and helps lenders evaluate your ability to manage mortgage payments. Every person’s DTI looks different, so it’s important to understand how yours is calculated.

Which Debts Do Lenders Consider?

Lenders include debts like car payments, credit card balances, student loans, alimony, and child support when calculating your DTI. These are the payments that directly impact your ability to get approved for a mortgage and determine your home buying power.

Debts That Don’t Count Toward DTI

Not all monthly expenses are counted in your DTI. Bills like cell phone, internet, health insurance, utilities, cable, and dental expenses, child care (except VA loans) typically don’t factor into lending decisions. While they aren’t considered by lenders, they still affect your personal budget and you definitely need to factor those into your comfort level.

Comfort Level vs. Lender Calculations

Even if certain bills aren’t included in your DTI, they still impact your day-to-day life. It’s really important to consider your comfort level, meaning, what you can realistically afford each month and also be comfortable with.

Tips for Managing Debt Before Buying a Home

Review all your monthly obligations and prioritize paying down debts that affect your DTI. Understanding the difference between lender-calculated affordability and your own personal budget helps you plan effectively and increases your chances of getting approved for the home you want and the home you can afford.