Which payments to enter
Start with gross monthly income, which is your pay before tax and other deductions. If you are applying with someone else, combine both incomes and both sets of debts.
Housing is your rent, or your mortgage payment with property tax and insurance. Then add car, student loan and credit card payments, using the card minimum rather than the balance. Other debts include personal loans and support payments. Leave out groceries, utilities, phone bills and subscriptions, since those are living costs and not debts.
Front-end and back-end ratios
The front-end ratio looks at housing alone: housing payment ÷ gross monthly income. The back-end ratio adds every other debt payment to housing before dividing by income. When someone says "your DTI" with no qualifier, they usually mean the back-end number, which is why it is the highlighted result here.
Example: $7,000 a month in gross income
With housing at $1,800, a $350 car payment, $200 for student loans and $100 in card minimums, total monthly debt payments are $2,450.00. The front-end ratio is 25.71% and the back-end ratio is 35.00%, just inside the first band.
Swap the car for one costing $650 a month and the back-end ratio rises to 39.29%, which moves it into the manageable band. One purchase is enough to change how an application reads.
What the bands mean
At or below 36% is generally good, about 37% to 43% is manageable, and above 43% is high. These are lender rules of thumb and not fixed limits. As the CFPB notes, different lenders and loan products set different limits. For housing alone, 28% is a common guide.
Canadian lenders use similar measures with different names. FCAC describes a gross debt service (GDS) ratio of up to 39% and a total debt service (TDS) ratio of up to 44%. GDS counts property tax, heating and half of any condo fees, so include those under housing to approximate it.
What this ratio cannot tell you
DTI ignores your credit history, savings and job stability, all of which lenders also weigh. It also uses income before tax, so 35% of gross pay takes a much larger bite out of what reaches your bank account. Use the Budget Planner to see that side.
The ratio also tracks payments, not balances. Paying down a loan improves your DTI only once that payment disappears.