What is debt-to-income ratio?
Debt-to-income ratio (DTI) compares how much you owe each month with how much you earn before taxes. Lenders use it to judge whether you can safely take on another payment, such as a mortgage, auto loan or personal loan. A lower DTI suggests more room in your budget.
There are two versions. Front-end DTI looks only at housing costs. Back-end DTI includes housing plus all other recurring debts, and is the one most people mean when they say "DTI".
How to calculate DTI step by step
- Add up your gross monthly income.
- Add your monthly housing payment.
- Add the minimum monthly payments on car loans, student loans, credit cards and other debts.
- Divide total debt by gross income and multiply by 100.
What counts as debt in DTI?
- Included: rent or mortgage (with property tax, homeowners insurance and HOA dues), auto loans, student loans, minimum credit card payments, personal loans, child support or alimony you are required to pay.
- Usually not included: utilities, groceries, phone, streaming services, gas, and insurance premiums other than homeowners insurance on a mortgage.
For credit cards, lenders typically use the minimum payment shown on your credit report, not the full balance.
Common DTI guidelines
| Back-end DTI | How lenders often see it |
|---|---|
| 36% or less | Generally considered healthy |
| 37% to 43% | Manageable, but may limit options or rates |
| Over 43% | High; harder to qualify, though exceptions exist |
These are rules of thumb. Requirements vary by lender and loan type. Many conventional loans allow DTI up to roughly 45% to 50% when credit score, savings and down payment are strong, while some other products have their own limits. Always ask the lender what they use.
How to lower your DTI
- Pay down debts with the highest monthly payment relative to balance, such as a car loan or credit cards.
- Increase your income with a raise, a documented second job or an added co-borrower.
- Avoid new debt before applying for a mortgage.
- Refinance or extend terms to lower a monthly payment, but compare the total interest cost first.
- Choose a lower housing payment with a larger down payment or a less expensive home.
DTI vs credit score
DTI and credit score measure different things. Your credit score reflects how you have handled credit in the past. DTI shows how much of your income is already committed. Lenders look at both, and a high score may offset a somewhat higher DTI, but a very high DTI can still lead to a denial or a higher rate.
Using the max-debt numbers
The calculator shows what total monthly debt would equal 36% and 43% of your income. Subtract your current non-housing debts from either figure to estimate how much housing payment fits within that limit. This helps when you are deciding what home price or rent range to look at.