How this calculator works
A debt-to-income ratio compares the monthly payments you owe with the gross income you earn. Lenders calculate it from payments reported on your credit file plus the proposed new payment, and use it as one measure of whether a borrower can carry more debt. The 43% figure is the general qualified mortgage threshold used in the United States; Canadian lenders work with gross debt service and total debt service ratios instead. Ratios above 50% usually require compensating factors such as large reserves.
Formula
DTI = (housing payment + all other recurring monthly debt payments) / gross monthly income. Housing ratio = housing payment / gross monthly income. Maximum debt at 43% = 0.43 × gross monthly income. Additional room is that maximum minus current payments and may be negative.
Worked example
With $6,500 of gross monthly income, an $1,800 housing payment and $700 of other debt, total payments are $2,500 and the DTI is 38.46%. The housing ratio is 27.69%. At 43%, the maximum total debt is $2,795, leaving $295 of room before the limit is reached.
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Frequently asked questions
Which payments count?
Count minimum credit card payments, car loans, student loans, personal loans, child support and the proposed housing payment. Exclude groceries, utilities, insurance not escrowed with the mortgage and voluntary savings.
Is 43% a legal maximum?
No. It is a common underwriting guideline in the United States. Approval also depends on credit history, down payment, reserves and the lender's own policy.
How can I lower my ratio?
Pay down or consolidate instalment debt to cut required payments, increase documented income, or reduce the housing payment. Moving a balance to a card with a low promotional payment lowers today's ratio but does not remove the debt.