In personal finance, what is the term for the percentage of income required for housing costs and debt payments?

In personal finance, the percentage of gross income needed for monthly debt payments is the debt-to-income ratio, commonly called DTI.

Lenders calculate DTI by dividing a borrower’s recurring monthly debt obligations by gross monthly income, then expressing the result as a percentage. Depending on the lender and calculation, housing costs may be included in a front-end ratio, while all qualifying debts appear in a back-end ratio. Definitions and acceptable limits vary by loan type and institution.

For example, $1,500 of qualifying monthly debt divided by $5,000 of gross monthly income produces a 30% DTI. The ratio helps lenders assess repayment capacity, but it is not a complete measure of financial health. Credit history, savings, employment stability, loan collateral, and the reliability of income also matter.

DTI differs from loan-to-value ratio, which compares a loan with the value of property securing it. It also differs from a budget percentage based on take-home pay: DTI typically uses gross income and specified debt obligations under the lender’s rules.