What Is the Loan-to-Income Ratio?

The loan-to-income ratio tells lenders how much of your gross income is already committed to debt payments. It is calculated as total annual debt payments divided by gross annual income, expressed as a percentage. This loan-to-income ratio calculator makes it easy to see where you stand before you apply for a mortgage, personal loan, auto loan, or student loan.

Why Lenders Care About LTI

A lower ratio means a larger safety margin between your income and your obligations, which makes you a lower-risk borrower. Mortgage lenders commonly cap the ratio at 43% — the Qualified Mortgage ceiling set by the CFPB — while many prefer 36% or less. Keeping your LTI comfortably under the threshold improves your chances of approval and can qualify you for better rates.

Improving Your Ratio

Because the ratio divides debt by income, you can improve it by paying down balances, consolidating higher payments, or increasing income. Even small changes move the number: reducing $200 in monthly payments on a $75,000 income lowers your LTI by about 3.2 percentage points.