Loans & Debt
Debt-to-Income Ratio Calculator
Work out the two ratios lenders actually look at — housing alone, and every debt together — and see how much of your monthly obligations would need to clear to reach the conventional 36%.
Your debt-to-income ratio
Back-end debt-to-income ratio
32.5%
Housing plus every other monthly obligation, over gross income.
Within the conventional 36%
At or below the 36% back-end figure most conventional lending is written around. This is the band the 28/36 rule of thumb points at.
The two ratios
- Housing only (front-end)
- 23.8%
- All debt (back-end)
- 32.5%
The figures behind it
- Gross monthly income
- $8,000.00
- Housing payment
- $1,900.00
- Other debt payments
- $700.00
- Total monthly obligations
- $2,600.00
To reach 36%
- Monthly payments to clear
- —
Nothing to clear — this ratio is already within the conventional 36%.
On $8,000.00 of gross monthly income, $2,600.00 of monthly obligations is a back-end debt-to-income ratio of 32.5%, with housing alone at 23.8%. At or below the 36% back-end figure most conventional lending is written around. This is the band the 28/36 rule of thumb points at. These thresholds are lending conventions rather than legal limits, and a lender weighs credit history, assets and residual income alongside the ratio.
Where lenders draw the lines
None of these thresholds is a legal limit. They describe what lenders and automated underwriting conventionally do, and they vary by programme, by lender and by the strength of the rest of your file.
| Back-end ratio | What it conventionally means |
|---|---|
| Up to 20% | Well inside every convention |
| 20% – 36% | The band conventional lending is written around |
| 36% – 43% | Above the comfort figure; many lenders still write here |
| 43% – 50% | Approvals narrow sharply, and pricing usually rises |
| Above 50% | Most lenders stop; some programmes and portfolios do not |
What this calculates
This divides your monthly debt payments by your gross monthly income, twice. The front-end ratio counts housing alone; the back-end ratio counts housing plus every other obligation on your credit report. Lenders look at both, and the back-end figure is the one that usually decides an application. The calculator also works out how much of your monthly obligations would have to clear to bring the back-end ratio down to 36%, which is the figure conventional lending is generally written around.
How it works
Gross monthly income G = annual income ÷ 12 front-end ratio = housing payment ÷ G × 100 back-end ratio = (housing + other debt) ÷ G × 100 To reach a 36% back-end ratio: reduction needed = (housing + other debt) − 0.36 × G Gross, not take-home: these ratios are conventionally applied to income before tax, which is why the figure looks kinder than your actual budget feels.
The arithmetic is a division, so the interesting part is what goes into it and where the lines fall.
Income is gross — before tax, before retirement contributions, before health premiums. That is the convention, and it is worth knowing that it flatters the result: a 36% ratio on gross income can be well over half of what actually arrives in your account. The ratio is a lending yardstick, not a budget.
On the debt side, lenders count the recurring obligations that appear on a credit report. Card minimums count, not the full balance and not what you usually pay. Auto loans, student loans, personal loans and court-ordered payments like child support count. Utilities, groceries, phone bills, insurance premiums and subscriptions do not — they matter enormously to your real budget and not at all to this calculation.
The two ratios answer different questions. The front-end ratio asks whether housing alone is affordable; the back-end ratio asks whether housing is affordable given everything else you already owe. The back-end figure is almost always the binding one, which is why paying off a card can change what you qualify for more quickly than a raise.
The conventional lines are 36% and, more loosely, 43%. Neither is law. 36% is where conventional lending is generally written; approvals narrow above 43% and largely stop above 50%. The 43% figure in particular is often called the Qualified Mortgage limit, and that is no longer accurate: the rule was amended to drop its DTI ceiling in favour of a price-based test, so the number survives as a lender habit rather than a legal threshold.
A worked example
Someone earning $84,000 a year, paying $2,100 a month for housing and $850 a month across a car loan and two credit cards.
Gross monthly income is $84,000 ÷ 12 = $7,000.
Housing alone is $2,100, so the front-end ratio is $2,100 ÷ $7,000 = 30%. That is two points above the 28% figure conventionally quoted for housing on its own — close enough that a lender would not dwell on it, and not where this application would run into trouble.
Adding the other debt gives $2,950 of total monthly obligations, and $2,950 ÷ $7,000 = 42.1%. This is the number that matters, and it lands in the band above 36% but below 43% — the range many lenders will still write, with more attention paid to the rest of the file.
To reach 36% the total would have to come down to 36% of $7,000, which is $2,520. That is $430 a month of obligations to clear. Notice what that figure is not: it is not $430 of balances, it is $430 of monthly payments. Paying off the car loan entirely might remove $480 a month at a stroke, which would take the back-end ratio to 35.3% and move the whole result into the conventional band — while clearing a far larger credit-card balance that only carries a $60 minimum would barely move it.
That asymmetry is the practical lesson of the calculation. For this ratio, the size of the monthly payment matters and the size of the debt does not. Which is worth knowing before choosing what to pay off first, because it points in the opposite direction from paying down the largest balance, and sometimes in the opposite direction from paying down the highest rate.
What this assumes
- Income is gross — before tax and deductions — because that is what these ratios are conventionally applied to.
- The housing figure is the whole monthly housing cost: rent, or mortgage principal and interest plus property tax, insurance, HOA fees and any mortgage insurance.
- Other debt is the sum of monthly minimum payments on obligations that appear on a credit report.
- The 36%, 43% and 50% thresholds are lending conventions, not legal limits, and no primary source establishes them as requirements.
- The reduction figure assumes you reduce monthly payments rather than income changing.
What it does not model
- This is not a lending decision. Credit history, assets, residual income, employment stability and the loan itself all weigh alongside the ratio, and none of them appear here.
- It does not model FHA, VA or USDA underwriting, which apply their own ratios and their own compensating factors.
- Self-employed and variable income is usually averaged over two years by a lender, and may be calculated quite differently from the figure you would naturally enter.
- Student loans in deferment or on income-driven repayment plans are counted inconsistently between lenders — some use the actual payment, some a percentage of the balance — so the right figure to enter is genuinely ambiguous.
- It says nothing about whether a ratio is comfortable for you. Gross income ignores tax, childcare, medical costs and retirement saving, all of which come out of the same money.
- A ratio inside every convention does not mean borrowing more is wise, and a ratio outside them does not mean an application is hopeless.
Questions
Is 43% really the legal limit for a mortgage?
No, and this is probably the most repeated piece of misinformation about debt-to-income ratios. The 43% figure comes from the original Qualified Mortgage rule, which did contain a DTI ceiling. That ceiling was removed: the rule was amended in 2020, effective in 2021, to replace it with a price-based test comparing the loan's APR to the average prime offer rate, and Appendix Q — the calculation method behind the old ceiling — was withdrawn along with it. The current text of 12 CFR 1026.43(e)(2) requires a lender to consider and verify debt-to-income or residual income, but sets no number. So 43% survives as a widely used lender habit and an automated-underwriting waypoint, not a legal limit.
Which ratio matters more, front-end or back-end?
The back-end ratio, almost always. It is the one automated underwriting systems weigh most heavily and the one that decides most applications, because it reflects everything you owe rather than housing in isolation. The front-end ratio is still useful to you: if housing alone is a large share of gross income, the budget is tight even when the back-end figure looks acceptable. But if the two disagree about whether you are in good shape, the back-end figure is the one a lender acts on.
What should I pay off first to improve my ratio?
Whatever has the largest monthly payment relative to its balance — which is often the opposite of what you would pay off first to save money. This ratio counts payments, not balances, so a $9,000 car loan at $480 a month improves it far more than a $16,000 credit-card balance at a $60 minimum, even though the card is the larger and probably the more expensive debt. Be clear about which goal you are pursuing: for total interest paid, the highest rate first is usually right; for a ratio you need to move before an application, the largest monthly payment first is what works. Paying a card down without closing it also helps your credit utilisation, which is a separate factor lenders weigh.
Does my rent count if I am buying a home?
Not in the ratio the lender uses to approve your mortgage. For a purchase, the housing figure is the payment on the home you are buying — principal, interest, property tax, insurance, HOA fees and mortgage insurance — because your rent will end. Enter the prospective payment rather than your current one if you are testing an application. Entering your current rent tells you something useful too, but it answers the question "how am I doing now" rather than "would this be approved".
Do credit card balances count, or only the minimum payments?
Only the minimum payments. A $20,000 balance with a $200 minimum adds $200 to the calculation, not $20,000. Use the minimum shown on the statement rather than what you actually pay each month, since that is the figure a lender pulls from your credit report. This is also why the ratio can look fine while revolving debt is a serious problem — a large balance at a small minimum barely registers here, and the interest cost is invisible to the calculation entirely.
Can I get a loan with a ratio above 50%?
Sometimes, but the options narrow considerably and the pricing usually reflects it. Some portfolio lenders, some credit unions and some government-backed programmes will write above 50% where there are strong compensating factors — substantial cash reserves, a long stable employment record, a large down payment, or a high credit score. VA loans in particular use residual income rather than relying on a DTI threshold, and can approve ratios that conventional lending would not. But at that level the more useful question is usually whether the payment is affordable rather than whether someone will approve it.
Sources
- Consumer Financial Protection Bureau — What is a debt-to-income ratio? (opens in a new tab)
How debt-to-income ratio is defined, which obligations count toward it, and the distinction between front-end and back-end. Note that this source does not establish the 36% or 43% figures as requirements.
- 12 CFR 1026.43(e)(2) — Qualified Mortgage standards (opens in a new tab)
The current text of the ability-to-repay rule, which requires a lender to consider and verify debt-to-income or residual income but contains no numeric DTI ceiling — the basis for correcting the widespread claim that 43% is a legal limit.
- CFPB final rule, 86 FR 60360 — General QM definition amendments (opens in a new tab)
The amendment that removed the 43% DTI ceiling and Appendix Q in favour of a price-based test, and its effective dates.
- Formula reviewed
- Formula version
- 1
Version 1 means the formula has not changed since this page was published. If it changes, this number moves and the change is described here.