Debt-to-Income Ratio (DTI)

Full definition

DTI = (Total monthly debt payments) / (Gross monthly income) x 100 What counts in the numerator: All minimum monthly debt payments that appear on your credit report. This includes credit card minimums, car loans, student loans, mortgage or rent (some lenders exclude rent), and any existing personal loans. Utilities, phone bills, and subscriptions are typically excluded. Gross vs net income: DTI uses pre-tax gross income, not take-home pay. This is an industry standard that allows for consistent comparisons across borrowers with different tax situations. DTI thresholds by lender type: Conventional mortgage: Maximum 43% back-end DTI (including all debts). Some programs allow up to 50% with compensating factors. Personal loans: Most lenders target under 40-45% total DTI after adding the proposed new payment. Some lenders (Upgrade, Avant) have approved borrowers up to 50% DTI for strong-income, good-credit applicants. Auto loans: Tend to focus on payment-to-income (PTI) in addition to DTI. Front-end vs back-end DTI: Front-end DTI includes only housing costs (mortgage/rent + property tax + insurance). Back-end DTI includes all debt payments. Personal loan lenders usually only calculate back-end DTI. Reducing DTI before applying: Pay off or pay down debts to eliminate minimum payments. Increase income (documented second jobs, freelance income, alimony). Co-borrower with income can reduce combined DTI if both incomes are counted. Do not open new credit cards (minimum payments increase DTI even if you do not carry a balance).

• Debt-to-income ratio (DTI)
• Gross Income
• Personal loan