---
title: DTI (debt-to-income ratio) — what it means and why it matters | Allocate AI
description: Your total monthly debt payments divided by your gross monthly income; lenders use it to decide how much mortgage or loan you can carry.
canonical: https://allocateai.io/glossary/dti
site: Allocate AI — https://allocateai.io
---

# DTI (debt-to-income ratio)

Your total monthly debt payments divided by your gross monthly income; lenders use it to decide how much mortgage or loan you can carry.

Debt-to-income ratio is the share of your gross monthly income that goes to debt payments. Lenders add up your minimum payments on cards, student loans, car loans, and the proposed new loan, then divide by monthly income before taxes. Rent is not included in the debt figure for a mortgage application because the mortgage would replace it.

Someone earning $10,000 a month gross with a $450 car payment, $300 of student loans, and $150 of minimum card payments has $900 of existing debt, or 9% DTI. Add a proposed mortgage payment of $2,800 including taxes and insurance, and the total is $3,700, or 37%.

Most mortgage lenders prefer a total DTI at or below 36%, with the housing payment alone at or below 28%. Many approve up to 43%, and some programs go to 50% with strong credit and reserves. The lower the ratio, the better the rate and the smoother the approval.

For people with variable pay, how income is counted matters. Base salary counts fully. Bonuses, commissions, and RSU income usually count only if there is a two-year history, and the lender averages it. A recent raise or a new equity grant may not count at all yet.

The common mistake is buying at the maximum a lender allows. A 43% DTI on gross income can be 60% of take-home, which leaves little room for anything else. Setting your own limit based on net income, not the lender's limit based on gross, keeps the house from owning you.

[Try the Rent vs. Buy Calculator →](https://allocateai.io/calculators/rent-vs-buy)

## Related terms

- [Credit score](https://allocateai.io/glossary/credit-score) — A three-digit number, usually 300 to 850, that summarizes how reliably you have handled borrowed money; lenders use it to set rates and approvals.
- [Rent vs buy break-even](https://allocateai.io/glossary/rent-vs-buy-break-even) — The number of years you would need to stay in a home for buying to come out ahead of renting, once closing costs, upkeep, and investment returns are counted.
- [Take-home pay (gross vs net)](https://allocateai.io/glossary/take-home-pay) — The amount that actually reaches your bank account after taxes, insurance, and retirement contributions come out of your gross pay.
- [Debt avalanche vs debt snowball](https://allocateai.io/glossary/debt-avalanche-vs-snowball) — Two ways to order debt payoff: avalanche pays the highest interest rate first to save the most money; snowball pays the smallest balance first for quick wins.

**Plan in plain language.**

Allocate answers “can I afford this?” from your own numbers, writes the plan, and stages every change for your yes. It starts from an estimate before you link a bank.

[Get started](https://app.allocateai.io/signup)

---

Allocate AI is a budgeting and financial-planning app: link your accounts, say what you want in plain words, and it writes the plan and stages every change for your approval. Read more at https://allocateai.io or see all pages in https://allocateai.io/llms.txt.