What debt-to-income ratio means
Your debt-to-income ratio, or DTI, is the share of your gross monthly income that goes to paying debts. Lenders use it to judge whether you can take on a new loan comfortably. It is one of the very first numbers a mortgage or car-loan lender looks at, so knowing yours before you apply is a real advantage.
The DTI formula
DTI = (total monthly debt payments / gross monthly income) x 100. Gross means before tax. Include loan, card, and mortgage or rent payments, but not everyday spending like groceries or utilities.
Worked example
If your debts come to 2,000 a month and you earn 6,000 gross, your DTI is 2,000 / 6,000 x 100, which is about 33%. That sits in the range most lenders are happy with.
What is a good DTI?
As a rough guide: 36% or below is healthy, up to 43% is often the ceiling many mortgage lenders will accept, and above 43% makes approval harder and rates worse. Lowering your DTI, by paying down a card or consolidating debt, can move you into a better bracket before you apply.
Frequently asked questions
What is a good debt-to-income ratio?
36% or lower is generally considered healthy. Many mortgage lenders treat 43% as the upper limit, and a lower ratio usually means easier approval and better rates.
Does rent count in DTI?
For a general DTI, include your housing payment (rent or mortgage). Some lenders also look at a 'front-end' ratio that is housing costs alone.
What counts as debt here?
Recurring debt payments: loans, credit cards, car finance, student loans and your mortgage or rent. Everyday bills like groceries, utilities and subscriptions are not included.
How do I lower my DTI?
Pay down balances (especially cards), avoid new debt before applying, or increase income. Consolidating high-rate debt can also reduce the monthly payments that feed the ratio.