Is it true that 43% back-end DTI is a common threshold for qualified mortgages?

43% back-end DTI is a common threshold for qualified mortgages

Is it true that dTI uses gross (pre-tax) income, not take-home pay?

DTI uses gross (pre-tax) income, not take-home pay

Is it true that student loans, car payments, and minimum card payments all count?

Student loans, car payments, and minimum card payments all count

43% common threshold

Debt-to-income ratio: what lenders measure

DTI is the primary metric lenders use to assess how much debt you can carry relative to income. Here is how it is calculated.

Quick answer

Debt-to-income ratio (DTI) is total monthly debt payments divided by gross monthly income, expressed as a percentage. Mortgage lenders look at front-end DTI (housing only, target under 28%) and back-end DTI (all debts, target under 36-43%). DTI is the single most important number in any loan application — improving it before applying directly improves both approval odds and offered rates.

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Key takeaways

04 · ideas

Front-end DTI: housing costs only. Back-end: all debt payments
43% back-end DTI is a common threshold for qualified mortgages
DTI uses gross (pre-tax) income, not take-home pay
Student loans, car payments, and minimum card payments all count

Debt-to-income ratio (DTI) measures monthly debt payments as a percentage of gross monthly income.

$$DTI = \frac{\text{Monthly debt payments}}{\text{Gross monthly income}} \times 100$$

Two versions:

Front-end DTI: Housing costs only (mortgage principal, interest, taxes, insurance) divided by gross income
Back-end DTI: All monthly debt payments (housing + car + student loans + card minimums) divided by gross income

Example: Gross income $7,500/month. Mortgage $1,600, car $350, student loan $200, card minimums $80. Total $2,230.

Front-end: $1,600 / $7,500 = 21.3%
Back-end: $2,230 / $7,500 = 29.7%