Understanding Your DTI

Debt-to-income ratio, or DTI, is simple to calculate and easy to get wrong by omission. Add up your minimum monthly debt payments — car loans, student loans, credit card minimums, personal loans, any court-ordered payments — and divide by your gross monthly income, meaning income before taxes. The result is a percentage. A household earning $6,000 a month with $1,500 in monthly debt payments has a DTI of 25%.

The two mistakes people make are using net income instead of gross, which understates the ratio, and forgetting a debt that doesn't feel like debt — a 0% promotional car loan, a payment plan on a phone, a private loan from family with a real repayment schedule. Lenders count all of it. So does HōMI.

HōMI's Financial Reality pillar scores DTI on a scale that mirrors decades of lending convention, because those lines exist for real structural reasons, not tradition for its own sake. At or below 28%, you earn the full 10 points — this is the range where a mortgage payment sits comfortably alongside everything else you're paying down, with room left over.

Between 28% and 36%, you earn 7 points. It's manageable, but the margin is thinner — a raise you were counting on, or a rate that stays where you expect it, matters more here than it did in the lower band. Between 36% and 43%, you earn 4 points. This is the zone where a single missed expectation — income growth that stalls, a debt that takes longer to pay off than planned — turns manageable into tight. Above 43%, you earn zero points for this factor. Lenders themselves start hesitating here; the math is telling you something before anyone else does.

Every other DTI band costs you points. Crossing 50% costs you the entire verdict. Regardless of how strong your down payment, your credit, or your emotional readiness looks, a DTI above 50% forces HōMI's verdict to NOT YET.

The reasoning is specific: above 50%, your monthly obligations leave almost no margin for the ordinary surprises of a life — a car repair, a medical bill, a slow month at work. It isn't that you can't make the payment this month. It's that you have no room to absorb the month that goes wrong, and eventually one does. That's a different kind of risk than a low score on a sub-factor, which is why it's treated differently.

Lenders care about DTI because it predicts default risk to them — will you make the payment. HōMI cares about the same number for a different reason: will making the payment cost you the rest of your financial life. A DTI that clears a lender's approval bar can still leave you with no room to save, to handle an emergency, or to feel anything other than stretched every month.

That's the gap HōMI is built to close. The lender's approval and your actual readiness are two different questions that happen to share one input number.

DTI moves in only two directions: pay down debt, or grow income, and the former is faster to control. Paying off a car loan with six months left can move your ratio more than a raise would, because it removes a fixed monthly obligation entirely rather than just growing the denominator.

For the practical, step-by-step version of this — how to size a target monthly payment against your real number, not the lender's maximum — see our guide, How Much House You Can Actually Afford. For how DTI fits alongside the other three hard-stops, see The Four Hard Stops.