Definition
Your monthly debt payments divided by your gross monthly income, used by lenders to judge whether you can afford a new loan.
What it means
Debt-to-income ratio, or DTI, compares what you pay each month on debts, such as a mortgage or rent payment in some cases, car loans, student loans, minimum credit card payments and child support, with your income before taxes. Mortgage lenders look at a front-end ratio, which counts only housing costs, and a back-end ratio, which counts all debts. Limits depend on the loan program and the rest of your file; many lenders prefer a back-end ratio around 36% or lower and may allow more for some loans. The CFPB's home buying materials explain that a lower DTI can improve your chances of approval and the terms you receive. Paying down balances or increasing income lowers DTI. Everyday costs like groceries and utilities are not counted.
Example
With gross income of $6,000 a month and debts of $1,500 housing + $400 car + $150 card minimums = $2,050, the back-end DTI is about 34% and the front-end ratio is 25%.
Illustrative numbers only. Your situation will differ.