The Short Answer
Your debt-to-income ratio, or DTI, is the percentage of your gross monthly income that goes toward paying your debts. It’s a key number lenders use to judge whether you can afford to take on a new loan. The lower your DTI, the more comfortably you can handle your payments — and the more likely a lender is to approve you.
To get the figure, you add up your monthly debt payments and divide by your gross monthly income (your income before taxes).
How to Calculate Your DTI
The formula is simple:
DTI = Total monthly debt payments ÷ Gross monthly income × 100
Example: Suppose your monthly debt payments look like this:
- Rent or mortgage: $1,500
- Car loan: $400
- Student loan: $300
- Credit card minimums: $100
That’s $2,300 in total monthly debt payments. If your gross monthly income is $6,000, your DTI is $2,300 ÷ $6,000 = 0.383, or about 38%.
What Counts in Your DTI
Lenders generally include recurring debt obligations:
- Rent or mortgage payments (including property taxes and insurance for homeowners)
- Auto loans
- Student loans
- Minimum credit card payments
- Personal loans and other installment debt
- Child support or alimony obligations
They usually do not count everyday living expenses like groceries, utilities, gas, insurance premiums (other than homeowner’s), or streaming subscriptions. DTI measures debt obligations, not your whole budget.
Front-End vs. Back-End DTI
Mortgage lenders often look at two versions:
- Front-end DTI — only your housing costs (mortgage, taxes, insurance) divided by income
- Back-end DTI — all your monthly debt payments, including housing, divided by income
The back-end ratio is the one most commonly referenced, since it captures your full debt load.
What’s a Good DTI?
- 35% or below — generally considered healthy; you have room in your budget and look strong to lenders
- 36% to 43% — manageable, and still within range for many loans, including most mortgages
- 43% to 50% — getting high; some lenders will still approve you, but options narrow
- Above 50% — more than half your income goes to debt, which lenders see as risky
For conventional mortgages, 43% is a commonly cited upper limit, though some loan programs allow higher ratios with strong compensating factors like a high credit score or large savings.
How to Lower Your DTI
- Pay down existing debt, especially balances with high minimum payments
- Avoid taking on new debt before applying for a major loan
- Increase your income through a raise, side work, or adding a co-borrower’s income
- Refinance or consolidate to lower a monthly payment (carefully, weighing the costs)
The Bottom Line
Your debt-to-income ratio shows how much of your income is already committed to debt, and it’s one of the most important numbers a lender checks. Keeping your DTI at or below about 35% gives you the most borrowing options and the best rates. If yours is high, paying down debt and avoiding new obligations before you apply can make a real difference.
Frequently Asked Questions
What is a good debt-to-income ratio?
A DTI of 35% or below is generally considered good and gives you the most borrowing options. Many mortgage lenders will go up to 43%, and some loan programs allow higher with strong credit or savings. Below 36% is a comfortable target.
Does DTI use gross or net income?
Gross income — your income before taxes and deductions. Lenders calculate DTI using your gross monthly income, not your take-home pay.
Does my DTI affect my credit score?
No. Your DTI is not part of your credit score because credit scores don’t factor in your income. However, lenders look at DTI separately, alongside your credit score, when deciding whether to approve a loan.
What debts are included in DTI?
Recurring debt payments: rent or mortgage, auto loans, student loans, minimum credit card payments, personal loans, and obligations like child support. Everyday costs such as groceries, utilities, and subscriptions are not included.
Can I get a mortgage with a high DTI?
It’s possible. Some loan programs allow DTIs above 43% if you have compensating factors like a high credit score, a large down payment, or significant savings. But a lower DTI gives you more options and better rates.
How quickly can I improve my DTI?
Paying off a loan or credit card can lower your DTI immediately, since it removes that monthly payment from the calculation. Avoiding new debt and boosting your income also help. It’s one of the faster financial metrics to improve.