Debt-to-Income Ratio (DTI)

Debt-to-income ratio is your total monthly debt payments divided by gross monthly income — the number that decides whether a mortgage lender says yes. Most conventional lenders cap it around 43%, with front-end housing costs alone under 28%. It uses gross income, so a 43% DTI is a much bigger share of your actual take-home pay than it sounds. Paying down a small loan with a large monthly payment can improve DTI more than paying down a larger balance.