Debt-to-income ratio: what's a good DTI?

Your debt-to-income ratio (DTI) is the share of your monthly income that already has a debt payment attached to it. Lenders, mortgage brokers and most landlords look at this number before anything else — it's a faster read on whether you can afford a new payment than your credit score is.

The formula

DTI = total monthly debt payments ÷ gross monthly income × 100

Use gross income (before tax), because that's what lenders use. Count the minimum payments, not the balances.

What counts, and what doesn't

Counts: rent or mortgage, car loan, student loan, credit-card minimum payments, personal loans, child support.

Doesn't count: groceries, utilities, phone bill, insurance, subscriptions, and anything you pay off in full each month with no minimum due.

Front-end vs back-end

Front-end DTI — housing payment only ÷ income. Target: under 28%.
Back-end DTI — housing plus all other debts ÷ income. Target: under 36%.

Together these are the "28/36 rule". Mortgage lenders will often stretch to 43% back-end, but that's their ceiling, not a comfortable place to live.

What your number means

Total DTI	What it signals
Under 28%	Excellent. You have real slack — build the emergency fund.
28–36%	Healthy. The range lenders like. Don't add new payments.
36–43%	Stretched. Approvals get harder and pricier. Start cutting.
Over 43%	High risk. Most mortgage approvals stop here.

Work out yours

Open the free debt-to-income calculator, enter your gross income, housing payment and other debt payments. It gives you both ratios and tells you which band you're in.

Three ways to lower your DTI — in order

Kill the smallest balance. Removing a whole minimum payment moves the ratio faster than shaving a big balance. Run the debt payoff calculator to see the order.
Don't add a payment. A new car loan a month before applying for a mortgage is the classic mistake — it can knock you out of approval.
Raise gross income. Overtime, a raise, or documented side income counts, as long as it's provable for a couple of years.

Refinancing to a longer term also lowers the monthly payment and therefore the ratio — but you'll pay more interest overall. Use it as a last resort, not a first move.

Where this fits

DTI is a checkpoint, not a plan. If yours is high, you're on the debt-payoff step of what to do with your money first. If it's healthy and you're house-hunting, check how much rent you can afford next.

Written by the Infovia team · free tools, no account needed. General information, not financial advice.

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