Debt-to-income ratio

The numerator is the payments due each month on debts: a mortgage payment or rent, a car loan, a student loan, the minimum on each credit card, and any other loan with a monthly amount. The size of the balances does not enter it; a $20,000 card balance and a $2,000 one count by their minimums. Groceries, utilities, insurance not tied to a loan and other living costs are left out.

The denominator is gross monthly income, the pay before taxes and deductions, which is what a lender verifies from a pay stub or a tax return. The same payments over take-home pay give a higher ratio, since take-home is the smaller figure.

Mortgage lenders often keep two versions. The front-end ratio is the housing payment alone over gross income. The back-end ratio, the one usually meant by DTI, is every debt payment over gross income.

A household's gross income is $7,500 a month. Its mortgage payment is $1,900, counted the way a lender counts it, with the escrow for property tax and insurance. A car loan takes $400 a month, and one credit card carries a $100 minimum. The debt payments come to $2,400, which is 32% of gross income. The housing payment alone is $1,900 of $7,500, a 25.3% front-end ratio.

The same household's take-home is $5,400 after withholding and pre-tax deductions. The $2,400 of payments is 44% of that deposit, though the DTI a lender computes stays at 32%: the ratio is defined on gross income.

Mortgage payment, with escrow

$1,900

Car loan

+ $400

Card minimum

+ $100

Monthly debt payments

$2,400

Gross monthly income

÷ $7,500

Debt-to-income ratio

32%

A lender reads the ratio as the part of income already spoken for by existing debts before a new payment is added. On a mortgage application, the new housing payment goes into the numerator in place of the current rent, so the ratio on the application is the one the loan would create, not the one the household has today.

One published threshold attaches to it. The CFPB's 2013 Ability-to-Repay rule gave a general qualified mortgage a 43% DTI ceiling; the CFPB's 2020 amendment to that rule, in effect from 2021, replaced the ceiling with a test based on the loan's price. Lenders set their own limits within the rules they operate under, and the limit varies by loan program.

The ratio moves when a payment does. In the example, the $400 car loan reaching its last payment takes it from 32% to 26.7%, with the card balance unchanged.

Taiga Finance shows no debt-to-income ratio. No page divides debt payments by gross income; take-home pay comes from the paycheck lines on the Plan, and a pre-tax deduction is a line of its own.

The nearest figures are the two halves, shown apart. On the Debt page, the rail reads “Monthly payments”, the amount going to each debt in scope (its planned payment, or its minimum when none is planned, and a mortgage's scheduled principal and interest), beside “Minimum monthly payment”, the sum of the minimums; a “Payoff plan” / “All debts” toggle sets which debts count. On the Plan, planned spending is drawn against take-home, not against gross income, and the Recurring page's “Of take-home” gauge divides the monthly recurring outflow it has found by the same take-home, with an “Exclude housing” control.