Debt-to-Income , usually referred to as “DTI”, is the percentage of total PITIA and monthly debt on your credit report (called “CDS”) compared to your pre-tax income (“CGMI”). For instance, if someone made $100/mo and only had a $50/mo car pmt, their DTI is 50%. The ratio is designed to assess how easily a brw could make pmts on a proposed loan, and is often the most important metric when determining loan eligibility.

Calculating Your DTI

DTI is expressed as a percentage by dividing your total monthly debt payments by your gross monthly income.

(Total Housing + CDS) / CGMI = DTI
{ (all housing expenses) + (combined debt on credit reports) } / (combined pre-tax income) = DTI

Debt (The Numerator)

The debt in this ratio includes the (a) PITIA of the property we’re financing, (b) existing PITIA on all other properties you own, and (c) all recurring debts on your credit report. Of those three, the latter—commonly referred to as “CDS” or “Consumer Debt Service”—is the most opaque.

  • PITIA (Principal, Interest, Taxes, Insurance, Association fees, etc) of the property you are purchasing or refinancing

  • PITIA of any other properties you own

What CDS is:

  • Minimum monthly credit card payments

  • Auto loans and leases

  • Student loans

  • Solar loans

  • Personal and furniture loans

  • Cosigned Loans

  • Child Support

  • IRS Pmt Plans

What CDS is NOT:

  • Current rent you will no longer be paying

  • Utilities, groceries, and gas

  • Insurance premiums (excluding homeowners)

  • Subscriptions like Amazon or Netflix

  • Medications

  • Etc

Income (The Denominator)

Combined Gross Monthly Income (CGMI): The sum of all pre-tax income and other deductions from all borrowers on the loan. For classic standard & govt loans, income sources must be stable and provable. Income from self-employment, rental properties, tips, bonuses, overtime, commissions, pensions, and Social Security are subject to unique underwriting guidelines.

DTI Limits and Approval

Lenders analyze your DTI to assess your financial risk, looking for evidence that you can comfortably take on a mortgage without falling behind.

Maximum DTI thresholds are generally:

  • 50% for standard conventional loans

  • 57% for FHA & VA loans

A low DTI does not guarantee approval. For example, a borrower with a 43% DTI can still fail underwriting if other components, such as a low FICO score or high Loan-to-Value (LTV) ratio, are too weak.

Example Scenario

Assume you are currently renting and make $8,000 per month before taxes. You don't own other property or have other income, but you do have a recurring $200 per month student loan payment under an IDR plan.

You have an accepted offer on a $400,000 primary residence condo with a 5% down payment. At a 7% interest rate, your proposed total "debt load" would be about $3,780 per month:

  • PITIA:

    • $2,688 mortgage principal and interest

    • $160 mortgage insurance (MI)

    • $417 property taxes

    • $175 homeowners insurance (HOI)

  • Other PITIA:

    • Mortgage: n/a

    • Property Taxes: $290

    • Ins: $225

    • HOA: $210

  • CDS

    • Minimum Credit Card Pmt(s): $150

    • Student Loan Pmt: $325/mo

    • Auto Loan: $800

    • Personal Loan: $415

Dividing your total debt of $3,780 by your $8,000 gross income gives you a DTI of 47.25%. Assuming you have a median FICO score above 720 and solid cash reserves left over after closing costs, you would likely qualify for a normal loan without any issues.