Debt-to-income ratio generally compares monthly debt payments with gross monthly income. Gross income is income before taxes and other deductions. The debt figure is the qualifying monthly payment amount, not the sum of the outstanding loan balances.

The Consumer Financial Protection Bureau's DTI explanation uses this formula: monthly debt payments divided by gross monthly income. Different lenders and loan products have different limits.

For an original example, assume a borrower has $72,000 in qualifying annual gross income, or $6,000 a month. Assume the lender includes these monthly obligations:

• Proposed qualifying housing payment: $1,600.
• Car payment: $350.
• Student loan payment: $150.
• Credit card minimum payment: $100.

The included payments total $2,200. Dividing $2,200 by $6,000 gives 0.3667, or approximately 36.7% DTI.

Do not substitute the remaining car loan balance for the $350 payment. Likewise, dividing by take-home pay would produce a different measure from the gross-income calculation being requested. A household can still consider take-home income when deciding what monthly spending feels affordable; that is a separate budgeting exercise.

Some problems distinguish a housing-only ratio from a total-debt ratio. Read which one is requested before choosing the numerator. In this example, $1,600 divided by $6,000 is about 26.7%, but that excludes the other debts and is not the total DTI.

The example assumes the listed income and payments qualify under the applicable program. A particular DTI does not promise mortgage approval or comfortable affordability. For further study, our mortgage qualification guide puts ratios alongside the other information a lender evaluates.