DTI is one of the simplest numbers in mortgages—and one of the most misunderstood.
Fannie Mae describes DTI as a ratio with total monthly obligations (including the subject mortgage payment and other debts) divided by total monthly income used to qualify.
How to calculate DTI (plain English)
- Add up monthly debt obligations (minimum payments)
- Divide by gross monthly income
How to improve DTI (legitimately)
1) Reduce monthly debt payments
Paying down installment loans can move the needle.
2) Avoid new debt
New monthly obligations can change the outcome quickly.
3) Document income correctly
Many “DTI problems” are actually documentation problems—especially for variable income and self-employed borrowers.
Does DTI include the new mortgage payment?
Yes—DTI includes the qualifying payment for the subject mortgage plus other debts.