What is a debt-to-income (DTI) ratio?

The debt-to-income ratio (DTI) measures your total monthly debt payments divided by your gross monthly income, expressed as a percentage. For example, if you earn $6,000 per month and have $2,100 in debt payments, your DTI is 35%. Lenders use DTI to assess your ability to manage monthly payments. Most conventional loans require a DTI of 43% or less, though some programs allow up to 50% with strong compensating factors. FHA loans typically allow DTIs up to 57% in some cases. Front-end DTI covers only housing costs; back-end DTI includes all debts.