July 31, 2025

When you apply for a mortgage, lenders look at a lot of numbers, but your Debt-to-Income ratio (DTI) is one of the biggest deal-breakers (or deal-makers) in the whole process. Right up there with your credit score, this formula plays a major role in whether you qualify for a loan and how much house you can afford, so it’s definitely something you should know about. It may sound technical, but DTI is pretty simple and easy to understand- and I’m going to show you how you can calculate it yourself.

What The Heck Is DTI, Exactly?

DTI stands for your Debt-to-Income ratio, and it’s how lenders measure how much of your income is already allocated for your monthly debt payments. In plain English, it’s how much you owe vs. how much you make.

Here’s the magic formula:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

For example, let’s say your total monthly income before taxes (that’s called your gross income) is $6,500 a month. The total PITIMA (principal, interest, property taxes, insurance, and mortgage insurance and homeowners dues if applicable), for the home you want to buy is $2,000 and you have $450 each month in recurring monthly debt payments. Your DTI would be:

$2,000 (PITIAM) + $450 (your monthly debt payments) = $2450 (your total monthly debt) ÷ $6,500 (your total monthly gross income) × 100 = 37.7%

Pretty simple, right? Most lenders like to see your DTI below a certain percentage, often 43% or less. The rule of thumb is the lower the better, although some loan programs allow for DTIs as high as 50%, but they may come with added requirements. You can always reach out to me and I can calculate the PITIA for you.

So What Counts as “Debt”?

Good question. Lenders don’t consider every bill you pay each month as debt in this formula, they are looking at your recurring, monthly debt obligations that will stick around after you buy a home.

Here’s what usually does count:

• Student loans
• Auto loans
• Credit cards (minimum monthly payments only)
• Personal loans
• Existing mortgages or home equity loans
• Alimony and child support

And here’s what usually doesn’t count:

• Groceries
• Utilities
• Gas or transportation
• Streaming subscriptions (as much as we love them)
• Cell phone or internet bills
• Child care (except VA loans)

Why Does Your DTI Matter?

Because it tells lenders how comfortably you can take on a mortgage payment on top of any other debt you’re already committed to. A high DTI could mean you’re stretching yourself too thin, and that’s a red flag for lenders. A lower DTI shows you’ve got room in your budget and you’re a safer bet. (Lenders really like that)

Bottom Line

If you’re thinking about buying a home, checking your DTI ahead of time can save you a lot of time and heartache. It helps you know where you stand and if you might need to pay off a little debt before applying. Your DTI is one of the key numbers that can make or break your mortgage approval. The good news? A little prep and awareness can go a long way. Crunch your numbers, clean up any unnecessary debt, and you’ll be that much closer to getting the keys to your new home.