The two ratios, and why the second one usually decides
Lenders do not look at one number, they look at two. The front-end ratio is your housing payment divided by gross monthly income. The back-end ratio is every monthly debt payment added together, divided by the same income.
Both limits apply at once, and whichever leaves you less is the one that governs. If you carry no other debt, the 28% front-end limit is what holds you back. Carry enough, and the 36% back-end limit takes over and starts shrinking your housing budget dollar for dollar.
That second case is the common one, and it is why clearing a car loan can raise your buying power faster than saving another few thousand for a down payment.
A worked example
Take $7,500 a month gross, a $1,900 housing payment and $800 of other monthly debt.
| Front-end | $1,900 ÷ $7,500 | 25.3% |
|---|---|---|
| Back-end | $2,700 ÷ $7,500 | 36.0% |
Comfortably inside on housing, exactly on the line overall. Add a $200 payment for anything and the back-end ratio goes to 38.7%, past the conservative benchmark, even though the housing payment has not changed at all.
What the limits are not
The 28/36 rule is a benchmark, not a law, and it says nothing about whether a payment is affordable for you. It ignores childcare, medical costs, an unstable income and everything else that is not a debt line. Use it as a reality check rather than a verdict, and pay attention to what the payment leaves you with rather than to whether you cleared a percentage.
Frequently asked questions
What is a debt-to-income ratio?
It is your total monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders use two versions: the front-end ratio counts only your housing payment, and the back-end ratio counts every monthly debt payment together. On $7,500 a month with $1,900 of housing and $800 of other debt, that is 25.3% front-end and 36.0% back-end.
What is a good DTI?
The conservative benchmark is 28% front-end and 36% back-end, which is where the 28/36 rule comes from. Many loan programmes approve higher — often into the low 40s, sometimes beyond with strong credit or reserves. A higher DTI means the loan is possible, not that it is comfortable.
Does gross or net income go in?
Gross, before tax. That is what lenders use, and it is why the ratios can look generous compared with what actually reaches your account. If your tax burden is unusually high, the limits are calibrated slightly wrong for you.
What counts as debt in the calculation?
Required monthly payments that show on your credit file: the mortgage or rent, car loans, student loans, credit card minimums and any court-ordered payments. Utilities, groceries, insurance and subscriptions do not count, even though they are just as real for your budget.
How do I lower my DTI?
Either raise income or remove a monthly payment. Removing a payment is usually faster, and clearing the smallest balance first can free up more ratio per dollar than paying down a large one. The calculator shows exactly how much monthly debt you would need to clear to get under each limit.