How to Calculate Your Debt-to-Income Ratio (DTI)
Your debt-to-income ratio (DTI) is your total monthly debt payments divided by your gross (pre-tax) monthly income, shown as a percentage. If you earn $6,000 a month before tax and pay $2,200 a month towards debts, your DTI is 36.7%. Lenders use it to judge whether you can afford a new loan, especially a mortgage. Lower is better; many lenders like to see 36% or less.
What counts as "debt payments"
Include the minimum required payment on:
- Mortgage or rent (for mortgage applications, the new housing payment including taxes and insurance)
- Car loans and leases
- Student loans
- Credit cards (the minimum payment, not the full balance)
- Personal loans, child support and alimony
Don't include everyday living costs like groceries, utilities, phone bills or insurance premiums (other than mortgage-related ones). DTI isn't a budget; it's a snapshot of fixed debt obligations.
A worked example
| Monthly payment | Amount |
|---|---|
| Housing (new mortgage incl. tax and insurance) | $1,500 |
| Car loan | $350 |
| Student loan | $250 |
| Credit card minimums | $100 |
| Total | $2,200 |
Gross monthly income: $72,000 ÷ 12 = $6,000.
- Back-end DTI (all debts): $2,200 ÷ $6,000 = 36.7%
- Front-end DTI (housing only): $1,500 ÷ $6,000 = 25%
What lenders look for
Thresholds depend on the lender and loan type, so treat these as rough guides:
- 28/36: a traditional guideline is housing under 28% of gross income and total debts under 36%. It's the same rule behind how much house can I afford?
- Up to around 43–50%: many mortgage programmes will go higher with strong credit, savings or a larger deposit. The old 43% cap for US "qualified mortgages" was replaced by a pricing-based test in 2021, but 43% is still a common reference point.
- Above 50%: approval gets much harder, and even if you're approved, the payments may leave little room in your budget.
Use the mortgage calculator to see how a different home price or rate changes the housing payment, and therefore your DTI.
How to lower your DTI
- Pay off small debts entirely. Clearing a $2,000 card with a $60 minimum removes the whole $60 from the calculation.
- Pay down the debt with the highest payment relative to its balance. Car loans near the end of their term are often good targets.
- Avoid new credit before a mortgage application: no new car loans or store cards.
- Increase income, though lenders usually want a stable history for extra income like overtime or freelance work.
- Choose a cheaper home or bigger deposit to shrink the housing payment.
The debt payoff calculator shows how fast you can clear balances, and should I pay off debt or save first? helps you balance it with saving a deposit.
DTI isn't the whole picture
Lenders also look at your credit score, deposit, savings and job history. And a DTI that a lender will accept isn't necessarily comfortable for you. Taxes, childcare, commuting and savings all come out of the same income. It's worth checking your take-home pay, not just the gross figure, with the take-home pay calculator before you commit to a big new payment.
Frequently asked questions
How do you calculate debt-to-income ratio?
Add up your monthly debt payments (housing, car, student loans, card minimums and other loans) and divide by your gross monthly income, then multiply by 100.
What is a good debt-to-income ratio?
36% or lower is generally considered good, with housing costs under about 28%. Some lenders accept higher ratios with strong credit or a larger deposit.
What is the difference between front-end and back-end DTI?
Front-end DTI only includes housing costs; back-end DTI includes all monthly debt payments.
Does rent count in debt-to-income ratio?
When applying for a mortgage, lenders use your proposed new housing payment instead of current rent. Other lenders may include rent when assessing affordability.