In personal finance, what is the ratio of monthly debt payments to gross monthly income called?

In personal finance, the ratio of monthly debt payments to gross monthly income is called the debt-to-income ratio.

It is usually expressed as a percentage. A borrower with $1,500 in qualifying monthly debt payments and $5,000 in gross monthly income has a 30% debt-to-income ratio. Mortgage lenders often calculate front-end and back-end versions, with the latter including broader recurring debts.

Gross income means income before taxes and other deductions. Debt-to-income ratio therefore differs from a budget’s comparison of payments with take-home pay. It also differs from credit utilization, which measures revolving balances against credit limits.

Lenders use debt-to-income ratio as one measure of repayment capacity, but policies differ by lender, loan type, credit history, assets, and other factors. A ratio is an underwriting measure, not a complete measure of a household’s financial health.