THE HOUSEHOLD · MONTHLY NUMBERS
Your household budget and a mortgage calculation may organize the same money differently.
Most people know what they pay each month. The confusion begins when a lender counts some obligations, treats some income differently, and builds a proposed housing payment that includes more than principal and interest. This exercise helps you see the calculation without pretending it tells you everything about affordability.
01 · What DTI means
Debt-to-income ratio, or DTI, compares certain monthly debt obligations with gross monthly income—income before taxes and deductions. The lender determines which income and debts count, how they must be documented, and which program requirements apply.
Front-end housing ratio
Proposed housing payment ÷ gross monthly income
BACK-END DTI
Housing payment + included monthly debts ÷ gross monthly income
02 · What counts as housing
Mortgage principal and interest
Property taxes
Homeowners insurance
HOA or association dues
Mortgage insurance when applicable
Total these pieces to estimate the proposed monthly housing payment.
03 · What may count as other monthly debt
Installment loans, revolving minimum payments, student-loan obligations, support obligations, and other recurring debts may be treated differently depending on the account, documentation, remaining term, borrower, and loan program. Do not assume a household expense is included—or excluded—without asking.
04 · Front-end versus back-end
The front-end ratio looks only at the proposed housing payment compared with gross monthly income. The back-end ratio adds other included monthly debts. The second number is usually higher because it reflects more obligations.
Calculation caution
Your lender may calculate income and debt differently from this worksheet. Variable, self-employed, bonus, commission, rental, or other income may require a particular history or calculation. Student loans, installment debts, revolving accounts, and obligations not shown on a credit report may also require specific treatment.
05 · Worked example
GROSS MONTHLY INCOME
$8,000
Income before taxes and deductions used for this example.
PROPOSED HOUSING PAYMENT
$2,600
Example components: $1,850 principal and interest + $420 property taxes + $160 homeowners insurance + $75 HOA dues + $95 mortgage insurance.
OTHER INCLUDED MONTHLY DEBT
$900
Installment, revolving, student-loan, or other obligations included in the example.
FRONT-END RATIO
$2,600 ÷ $8,000 = 32.50%
BACK-END DTI
$3,500 ÷ $8,000 = 43.75%
Michelle’s note
Qualifying and feeling financially comfortable are different questions. A ratio can help explain how a lender views the file. It cannot tell you what your childcare, medical needs, savings goals, repairs, travel, or ordinary life will feel like after the payment begins.
06 · Your numbers
A · Gross monthly income
Income used for this exercise: $________________
Questions about how it may be calculated: ______________________________
B · Proposed housing
Principal and interest: $____________
Property taxes: $____________
Homeowners insurance: $____________
HOA dues: $____________
Mortgage insurance: $____________
Total proposed housing: $____________
C · Other included monthly debts
Installment debts: $____________
Revolving minimum payments: $____________
Student-loan obligations: $____________
Other recurring debts: $____________
Total other debts: $____________
D · Calculate
Front-end: housing $________ ÷ income $________ = ______%
Back-end: housing + debt $________ ÷ income $________ = ______%
07 · What the result does—and does not—tell you
It organizes a lender-style comparison between gross income and selected monthly obligations.
It can help you ask why a lender’s number differs from your own.
It does not establish approval, a program limit, or a safe personal payment.
It does not account for every household expense, savings goal, repair, or risk.
It is a starting point for a more specific conversation—not the final answer.
Return when the next question arrives.
Keep the worksheet as a conversation tool. Return to the library when you need to connect these ratios with credit, cash to close, or the wider mortgage process.
Educational disclaimer
This resource is for educational and informational purposes only. It is not individualized legal, tax, investment, financial, credit, or mortgage advice. Mortgage programs, rates, costs, eligibility, and approval requirements vary by borrower, property, lender, and market conditions. Consult appropriately qualified professionals regarding your circumstances.