Your debt-to-income ratio (DTI) is a single number lenders use to judge whether you can comfortably take on a payment. The math is simple arithmetic once you know exactly what to add up — and getting it right matters, because using the wrong income figure or the wrong payment amounts can throw your number off by a lot. Below is the formula, a precise list of what to include and exclude, a worked-through example, and the mistakes that trip people up.
The short answer: the formula
DTI is your total minimum monthly debt payments divided by your gross (pre-tax) monthly income, multiplied by 100:
- Step 1: add up every minimum monthly debt payment.
- Step 2: find your gross monthly income (before taxes and deductions).
- Step 3: divide the payments by the income.
- Step 4: multiply by 100 to turn it into a percent.
That percent is your back-end DTI — the one most people mean when they say "DTI." You can also run the debt-to-income ratio calculator to do it instantly.
Step by step, with an example
Here is an illustrative walk-through using clearly hypothetical, round placeholder numbers — these are an example only, not real averages. Say your minimum monthly debt payments are a housing payment, a car payment, a student-loan payment, and a credit-card minimum, and together they add up to a certain monthly total. Say your gross monthly income — what you earn before taxes — is a larger monthly figure.
- Add the payments together to get your monthly debt total.
- Divide that total by your gross monthly income.
- Multiply the result by 100.
For instance, if your minimums summed to a figure that is roughly one-third of your gross income, dividing one by the other and multiplying by 100 lands you near 33 percent. The exact percent depends entirely on your own numbers; the point is the procedure, not any specific dollar amount. Once you have your number, see what is a good debt-to-income ratio to interpret it.
What counts toward DTI
Only actual debt payments go on the top of the fraction. Include the minimum required payment for each of these:
- Rent, or your mortgage payment including principal, interest, property taxes, homeowners insurance, and any HOA dues.
- Minimum credit-card payments (the minimum due, not the full balance).
- Auto loans.
- Student loans.
- Personal loans and other installment loans.
- Court-ordered child support or alimony.
If you co-signed a loan for someone else, that payment generally counts too, because you are legally responsible for it — lenders see it on your credit report.
What does not count
Regular living expenses are not debt payments, so they stay out of the calculation even though they cost real money each month:
- Utilities (electric, gas, water).
- Phone and internet.
- Groceries and gas.
- Insurance premiums (health, auto, life).
- Income taxes withheld from your pay.
- Streaming services and subscriptions.
If it is a bill but not a loan, credit account, or support order, leave it out. This is also why DTI is different from credit utilization: utilization is your card balances divided by your credit limits (a credit-score factor), while DTI is payments divided by income (a lender affordability factor). Paying down card balances helps both.
Gross income vs. net income
Use gross income — your pay before taxes, retirement contributions, and other deductions — not your net take-home pay. This is the single most common error, and it matters: net pay is smaller than gross, so using net makes your DTI look worse than the number a lender will actually calculate. Include steady, documentable gross income: wages, salary, reliable self-employment income, and other income you can verify. If your pay varies, lenders typically average it over time and may ask for tax returns.
Front-end vs. back-end DTI
There are actually two DTIs, and it helps to compute both:
- Front-end (housing) ratio: your housing payment alone divided by gross income. Lenders watch this when you apply for a mortgage.
- Back-end ratio: all your monthly debt payments — housing plus every other debt — divided by gross income. This is the headline "DTI."
The common 28/36 rule of thumb suggests keeping housing near or under 28 percent (front-end) and total debt near or under 36 percent (back-end). Many lenders approve higher, but it is a useful guideline. To compute the front-end ratio, just use your housing payment as the numerator; for the back-end, use the full payment total from the steps above.
Common mistakes to avoid
- Using net income instead of gross. Always use pre-tax income, or your number will be off.
- Using full credit-card balances instead of minimum payments. Only the monthly minimum counts toward DTI.
- Forgetting co-signed loans. If you are on the loan, the payment counts even if someone else pays it.
- Leaving off support orders. Court-ordered child support or alimony you pay counts as a monthly obligation.
- Counting living expenses. Utilities, groceries, and insurance premiums are not debt.
If your number comes back high, the cause matters. A high DTI driven by unsecured debt you genuinely cannot afford — credit cards, personal or medical debt — is worth addressing; a good first step is free nonprofit credit counseling through an NFCC member agency. A high DTI driven by a mortgage, auto loan, student loan, or support order is not something a settlement company can "fix," and any settlement route is a last resort that carries credit-score damage and a possible tax bill — a real trade-off, and outcomes are not guaranteed. Whatever the source, lowering DTI means lowering your monthly debt payments relative to income, not paying a company to make the ratio disappear. You can pull your credit report to confirm every balance and minimum payment before you do the math.
This page is general information, not financial advice. Lender standards vary and your situation is unique — consider talking to a nonprofit credit counselor before you act.