Debt-to-Income Ratio Explained: How Lenders Decide What You Can Borrow

By David Parks · eXp Realty · The Apollo Group · 2 min read

The Short Answer

Debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. Lenders use it to decide how much you can safely borrow.

Debt-to-Income Ratio Explained: How Lenders Decide What You Can Borrow
Illustration by David Parks

How it is calculated

Add up monthly debts like the new mortgage payment, car loans, student loans, and credit card minimums, then divide by gross monthly income.

Two ratios

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Typical limits

Limits vary by loan type and lender, and some programs allow higher ratios with other strengths like strong credit or reserves. Ask a lender what applies to you.

Ways to improve it

Keep in mind

What a lender approves may be more than what feels comfortable. Plan your budget around your lifestyle, not just the maximum.

Key Takeaways
  • How it is calculated: Add up monthly debts like the new mortgage payment, car loans, student loans, and credit card minimums, then divide by gross monthly income.
  • Two ratios: Front-end DTI: housing costs only.
  • Typical limits: Limits vary by loan type and lender, and some programs allow higher ratios with other strengths like strong credit or reserves.
  • Ways to improve it: Pay down credit cards or loans.

This article is general information, not legal, tax, financial or inspection advice. Every home and situation is different, so confirm details with a licensed inspector, lender, attorney or tax professional.

David Parks
About David Parks

David is a Greater Denver real estate advisor with eXp Realty and The Apollo Group (Colorado broker license FA100103211). He has closed more than $55 million in volume, earned eXp Icon status in 2025, and holds a 5.0 rating on Zillow from 27 verified reviews.

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