Your debt-to-income ratio (DTI) compares your monthly debt payments to your monthly income. It's one of the most important numbers lenders look at — sometimes even more heavily weighted than your credit score, especially for mortgage approval.
How to calculate your DTI
- Add up your minimum monthly debt payments — credit cards, auto loans, student loans, personal loans, and (if applying for a mortgage) your projected new housing payment.
- Divide that total by your gross (pre-tax) monthly income.
- Multiply by 100 to get a percentage — that's your DTI.
Example
What counts as a healthy DTI
| DTI range | General assessment |
|---|---|
| Below 36% | Generally considered healthy by most lenders |
| 36-43% | Manageable, but approaching the upper limit for many loan programs |
| 43-50% | Some loan programs still allow this, often with stricter requirements |
| Above 50% | Difficult to qualify for most new credit, especially a mortgage |
Front-end vs. back-end DTI
Mortgage lenders often calculate two versions: front-end DTI (just housing costs divided by income) and back-end DTI (all debts, including the new mortgage, divided by income). Both matter for approval, and lenders typically set maximum thresholds for each.
Why DTI matters even outside a mortgage
Auto lenders and personal loan providers also frequently factor in DTI, since it measures your capacity to take on a new payment regardless of your credit history. A strong credit score with a high DTI can still result in denial or a higher rate.
How to lower your DTI before a big application
- Pay down or pay off smaller debts to eliminate their monthly payments entirely, rather than just reducing balances.
- Avoid taking on new debt in the months before a major loan application.
- Increase income where possible — a raise, a side income, or including a co-borrower's income if applicable.
- Consider paying off an auto loan or personal loan with savings if it meaningfully improves your ratio and you'd still keep an adequate emergency fund.
