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Debt relief glossary

Debt-to-income ratio (DTI)

Your total monthly debt payments divided by your gross monthly income — used by lenders to assess affordability.

Last updated 2026-10-25. Definitions are educational, not legal advice.

Debt-to-income ratio (DTI) is the percentage of your gross monthly income consumed by monthly debt payments. Lenders calculate it as: total monthly debt payments ÷ gross monthly income × 100. Front-end DTI includes only housing costs; back-end DTI includes all recurring debt payments. Conventional mortgage guidelines require a back-end DTI of 43% or less; FHA loans allow up to 57% with compensating factors; VA loans have no hard cap but prefer below 41%. After bankruptcy, reducing your DTI is the primary financial goal before re-qualifying for a mortgage — Chapter 7 discharges most unsecured debt and can immediately lower DTI significantly.

Sources

  1. CFPB, Debt-to-Income Calculator (accessed 2026-10-25)

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More glossary terms

  • Chapter 7 bankruptcy

    A federal liquidation bankruptcy that discharges most unsecured debt in 3–6 months.

  • Means test

    The two-part income and expense formula that determines whether you qualify for Chapter 7.

  • Debt settlement

    Negotiating with a creditor to accept less than the full balance owed as payment in full.

  • SSDI (Social Security Disability Insurance)

    Federal disability benefit for workers who have paid into Social Security and can no longer work.

  • Statute of limitations on debt

    The deadline after which a creditor can no longer sue to collect a debt — but the debt may still exist.

  • Structured settlement

    A personal injury or workers' comp settlement paid as a series of future tax-free payments instead of a lump sum.

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