Two ratios, one question: is there room for another payment?
Your debt-to-income ratio (DTI) compares the payments you are already committed to with the income that has to cover them. Lenders calculate it before almost any mortgage, car loan or personal loan decision, because it answers a question your credit score does not: not whether you have paid reliably in the past, but whether your budget can physically absorb one more obligation. This calculator shows both versions lenders use. The front-end ratio counts housing alone — rent, or mortgage principal, interest, taxes and insurance — divided by gross monthly income. The back-end ratio counts housing plus every other recurring debt payment. For most lending decisions the back-end figure is the one that matters, which is why it is the headline result above.
The DTI formulas
Back-end DTI = All monthly debt payments ÷ Gross monthly income × 100
Use gross income — pay before tax and deductions — because that is the basis lenders use, and count required monthly payments, not balances. A $5,000 card balance with a $100 minimum payment enters DTI as $100 a month; the balance itself never appears in the formula. That is why two households with identical debts can have very different ratios: the payment, and the income underneath it, are what count.
The 28/36 guideline and the 43% ceiling
The traditional rule of thumb, often called the 28/36 rule, suggests housing costs stay under 28% of gross income and all debts together under 36%. It is a guideline for a comfortable budget, not a legal limit, and real lending is more layered. Many mortgage programs treat a back-end ratio around 43% as a ceiling for a 'qualified mortgage' — a category that gives lenders legal protection when they have verified the borrower can repay. Some loans are approved above 43% with strong compensating factors such as excellent credit, large cash reserves or a big down payment, and some lenders set their own lower internal caps. Falling under 36% does not guarantee approval, and sitting at 40% does not guarantee refusal; but every point above the mid-30s narrows your options and often your price, because lenders price in the extra risk.
Worked example
You earn $6,000 a month gross. Your rent or mortgage payment is $1,200, your car payment is $300, your card minimums total $100, and other loans take $100 — total debts of $1,700 a month. The front-end ratio is $1,200 ÷ $6,000 = 20.0%, comfortably under the 28% guideline. The back-end ratio is $1,700 ÷ $6,000 = 28.3%, comfortably under 36% and well under the 43% ceiling. A lender reading those two numbers sees a borrower with room to spare — roughly the position you want to be in before adding the new payment you are applying for, because that payment will push the back-end ratio higher still.
What counts as a debt — and what does not
Count payments a lender can verify and that you are contractually required to make: rent or mortgage (including taxes and insurance in the mortgage figure), car loans and leases, credit card minimum payments, student loans, personal loans, and court-ordered payments such as child support or alimony. Do not count ordinary living costs, even large ones: utilities, groceries, fuel, subscriptions, health or car insurance premiums, and taxes are not debts for DTI purposes, because they are not repayments of borrowed money and can in principle be adjusted. This distinction surprises people — a household spending $600 a month on groceries has the same DTI as one spending $200 — but it also means the fastest DTI improvements come from the short list of true debts, not from general economising.
Worked example
On $6,000 a month of gross income, $1,200 of housing gives a front-end ratio of 20.0%, and $1,700 of total debts gives a back-end ratio of 28.3% — inside both the 36% guideline and the 43% qualified-mortgage ceiling, with room for a new payment if the rest of the application is strong.
How to use this calculator
- Enter your gross monthly income — your pay before tax and deductions; combine both incomes for a joint application.
- Enter your rent, or your full mortgage payment including taxes and insurance if you own.
- Add your car loan or lease payment, then the minimum payments on your credit cards — minimums, not your usual payments.
- Add any other monthly loan payments, such as student or personal loans, in the final field.
- Read the back-end ratio first, find your band in the table below, and if it is above 36% work on the largest payment before applying for new credit.
How to lower your DTI
There are only three levers, and they are not equal. Pay a debt off entirely is the strongest move, because it removes the whole payment from the numerator: clearing a $300 car payment lowers the back-end ratio by five full points on a $6,000 income, while paying $300 extra on a card whose minimum barely changes may move it almost nothing. Raise gross income works on the denominator — a pay rise, a second income on a joint application, or documented side income all help, though lenders usually want to see around two years of history for irregular income. Refinance or consolidate can cut a payment by stretching it over a longer term, which genuinely lowers DTI even though it may cost more interest overall; weigh that trade with the Refinance Calculator before using it just to pass a threshold.
DTI is not your whole application
A good ratio opens the door; it does not carry you through it. Lenders also weigh credit history, the size of your down payment, cash reserves left after closing, employment stability, and the value of the property itself. Conversely, a ratio a little above a guideline can sometimes be offset by strength in those other areas. Treat the figure here as the honest starting point: if your back-end ratio is already in the high band before the new loan, the cheapest improvement to your application is usually time spent shrinking a payment — not a bigger house budget. To turn an affordable ratio into an actual price, use the Home Affordability Calculator; to attack the debts themselves, the Debt Payoff Calculator builds the plan.