Debt to Income Ratio (DTI)

A person’s debt to income ratio is the percentage of their monthly gross income that goes towards paying debts. It is an assessment of their income strength. It is usually expressed as two numbers with the first number representing the percentage of income that goes towards monthly housing expenses. These expenses are commonly referred to as PITI (Principal, Interest, Taxes, Insurance). The second number represents the percentage of income that goes towards the housing expenses PLUS other recurring debts such as credit card payments, car loans, child support, and so forth.

Most lenders require that a borrower's debt to income ratio not exceed 28/36 although lenders exist that will exceed that amount.

An example of the payments required for a borrower who would qualify for a 28/36 DTI loan:

  • Borrower earns $120,000 annually, this equals $10,000 monthly.
  • $10,000 monthly income x 0.28 = $2800 allowed for total monthly housing expenses.
  • $10,000 monthly income x 0.36 = $3600 allowed for total monthly housing expenses plus any recurring debt.