• The initial debt-to-income ratio (DTI), or housing ratio, calculates how much of a person’s gross income is spent on housing costs.
  • External DTI is usually calculated as housing costs (eg mortgage payments, mortgage insurance, etc.) divided by gross income.
  • Internal DTI calculates the percentage of gross income spent on other types of debt such as credit cards or car loans.
  • Lenders generally prefer a pre-DTI of no more than 28%.
  • The internal DTI, also called the internal coefficient, considers housing costs as part of the calculation.