Definition
DTI is your total monthly debt (including your new mortgage) divided by gross monthly income. Most conventional lenders want this below 43%, ensuring you can cover obligations. Calculate it before shopping mortgages to understand your borrowing capacity realistically.
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DTI is typically expressed as a single percentage and includes the proposed mortgage payment plus all other monthly debt obligations (car loans, student loans, credit cards, etc.). Most conventional lenders want to see a DTI below 43%, though FHA loans may allow up to 50%. DTI helps lenders ensure borrowers can afford their new mortgage while managing existing debts.
Pro Tip
Reduce existing debt or increase income before applying for a mortgage to improve your DTI and qualify for better rates.
Example
A borrower earning $6,000 monthly with $1,200 in existing debt and a proposed $2,000 mortgage payment has a DTI of 53% ($3,200 ÷ $6,000), which exceeds conventional limits.