Debt-to-income ratio is the percentage of a borrower's gross monthly income that goes toward paying debts. Lenders use it as a key measure of whether a borrower can comfortably take on a mortgage payment.
Lenders often look at two figures: the front-end ratio, covering housing costs like PITI, and the back-end ratio, covering all monthly debt obligations including the mortgage, car loans, student loans, and credit cards. Lower ratios indicate more borrowing capacity.
Guidelines vary by loan program, but many lenders prefer a back-end DTI at or below roughly 43 percent, though some programs allow higher. A high DTI can lead to a smaller approved loan amount or a denial.