Your debt-to-income ratio, DTI, is the number lenders care about almost as much as your credit score. It is simple math with outsized consequences: it can be the difference between approval and rejection, or between a good rate and an expensive one.

What DTI actually measures

DTI is your total monthly debt payments divided by your gross monthly income, expressed as a percentage.

DTI = (Monthly debt payments ÷ Gross monthly income) × 100

Monthly debts include: mortgage or rent, car loans, student loans, minimum credit card payments, child support, and any other required monthly obligations. It does not include utilities, groceries, insurance premiums, or taxes, only debt payments.

Example: $2,800 in monthly debts ÷ $8,000 gross monthly income = 35% DTI.

The two DTIs lenders use

Mortgage lenders actually look at two ratios:

  • Front-end ratio: Housing costs only (mortgage, taxes, insurance, HOA) ÷ income. Lenders typically want this under 28%.
  • Back-end ratio: All monthly debts ÷ income. Conventional loans usually cap this at 36–45%; FHA allows up to 50–57% in some cases with compensating factors.

This is the famous 28/36 rule: spend no more than 28% of income on housing and 36% on all debts. It is a guideline, not a law, but it is the backbone of mortgage underwriting.

What counts as "good"

  • Under 20%: Excellent. You have tons of borrowing capacity.
  • 20–35%: Healthy. Most lenders will be happy.
  • 36–43%: The caution zone for conventional mortgages. Still approvable, often with a good credit score.
  • 44–50%: Difficult for conventional; FHA or other programs may work with strong compensating factors (big down payment, cash reserves, excellent credit).
  • Over 50%: Very hard to get new credit. Time to pay down debt first.

How to lower your DTI before applying

You can attack either side of the fraction:

Reduce the debts (numerator):

  • Pay off small loans entirely, eliminating a $200/month payment moves the needle more than partially paying a large one.
  • Pay down credit cards to reduce minimum payments (note: minimums are what count, not balances).
  • Avoid new debt completely in the 6–12 months before applying.

Increase the income (denominator):

  • Lenders use documented, stable income: salary, consistent bonuses, verified side income with a 2-year history.
  • A raise or a working spouse's income counts once documented.

Do not: close old accounts (hurts credit age), take on new debt, or make large undocumented deposits that trigger underwriting questions.

DTI is not just for mortgages

Auto lenders, landlords, and personal loan underwriters all use DTI variants. Even if you are not buying a house, keeping DTI under 35% means you are living within your means with room for surprises.

The bottom line

Calculate both your front-end and back-end ratios before you talk to any lender. If you are over the thresholds, you now know exactly how much debt to clear or income to document. Check your housing budget with our home affordability calculator and map your payoff plan with our debt payoff calculator.

Estimates for planning only, not financial advice.