Debt to Income Ratios (DTI) are calculated by taking the total proposed monthly housing payment (PITI) plus all other monthly liabilities (revolving credit cards, installment loans, second mortgages, etc.) and dividing it by the total gross monthly income. Conforming lenders typically limit this ratio to 36%.
Non-conforming and sub-prime lenders generally allow for a greater debt to income ratio. Their ratio limitations can generally exceed conforming limits, in some cases as high as 50%.
When calculating total monthly liabilities, in addition to credit card payments, installment loan payments (car loans, student loans, etc.) and mortgage payments, child support, alimony, payroll garnishments, and negative rental income should also be included.