Debt-to-Income Ratio Explained
Your debt-to-income ratio, or DTI, is one of the first things a lender checks. It measures how much of your income already goes to debt, which tells them how much room you have to take on more.
How to calculate DTI
Add up your total monthly debt payments (loans, cards, car finance, and your rent or mortgage), divide by your gross monthly income, and multiply by 100. If you pay 2,000 a month in debts and earn 6,000 gross, your DTI is about 33%.
Front-end vs back-end
The front-end ratio counts only your housing payment, while the back-end ratio counts all your debts. Mortgage lenders usually look at the back-end figure, and often the front-end too.
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.
How to lower your DTI
Pay down high balances (especially cards), avoid taking on new debt before you apply, or consolidate expensive debt into a cheaper single payment. Even a small drop can move you into a better bracket.
Check yours
Work out your ratio with the Debt-to-Income Calculator, and see the effect of clearing debt with the Credit Card Payoff Calculator and Debt Consolidation Calculator.
Frequently asked questions
What is a good debt-to-income ratio?
36% or below is healthy. Many mortgage lenders treat 43% as the ceiling, and a lower ratio means easier approval and better rates.
What counts toward DTI?
Recurring debt payments: loans, credit cards, car finance and your rent or mortgage. Everyday bills like groceries and utilities do not count.
How can I lower my DTI?
Pay down balances, avoid new debt before applying, increase income, or consolidate high-rate debt into a cheaper single payment.