DTI Ratio Chart

A Debt-to-Income (DTI) ratio is a financial metric that compares your total monthly debt payments to your gross monthly income, expressed as a percentage. Lenders use DTI to assess your ability to repay a loan, with a lower ratio generally indicating less risk and a higher chance of loan approval. To calculate it, you divide your total monthly debt payments (like loans, credit cards, and rent) by your gross monthly income and multiply by 100.

Front-End DTI vs. Back-End DTI

Front-end DTI reflects the percentage of monthly gross income that comprises your expected monthly housing expenses.

Back-end DTI ratio represents the percentage of your gross monthly income that goes to all debt payments. In other words, the back-end DTI includes your total housing expenses plus all other monthly debt payments

Why DTI Matters:

Loan Approval:

It’s a key factor lenders use to decide whether to approve you for a loan or line of credit.

• Interest Rates: A better DTI can increase your chances of getting approved and may even result in a better interest rate

Lower is better: Generally, lenders prefer a lower DTI ratio:

36% or less: This is often considered a good DTI, indicating manageable debt.
36% to 49%: This range may cause lenders concern, though it might be acceptable for some loans.
50% or more: This DTI may limit your borrowing options, as it suggests you have little money left after debt payments