Debt-to-Income Ratio (DTI)
Debt-to-income ratio is the share of your gross monthly income that goes toward debt payments. Lenders use it to judge how much more you can borrow: most want your total debt payments below 36% of income, and your housing payment alone below 28% — the classic 28/36 rule.
Two figures are calculated and both must pass: front-end, the housing payment alone, traditionally capped at 28% of gross income, and back-end, every monthly debt including the new mortgage, traditionally 36% and in practice often allowed to 43–45%, higher still on FHA loans. Whichever binds first sets your budget. The detail that changes what you should do about it is that lenders count payments, not balances: a $500 car payment counts as $500 whether $22,000 or $2,000 remains, so halving the balance changes nothing while clearing it entirely removes $500. At 6.5% over 30 years, that $500 supports about $79,100 of mortgage — usually more than any realistic extra saving could add.
Put it to work
Home Affordability Calculator
How much house can you afford? Get a realistic max price from your income, debts, and down payment using the 28/36 rules lenders actually apply.
Debt Payoff Calculator — Snowball vs Avalanche
Enter up to three debts and compare the snowball and avalanche strategies head-to-head: payoff dates, total interest, and what the difference costs.