Debt-to-income (DTI) ratio compares your monthly debt payments to your gross monthly income. It is a core factor in mortgage, auto and personal loan approval.
How DTI is calculated
Add up recurring monthly debt payments such as housing, car loans, student loans, minimum card payments and other loans. Divide by gross monthly income. A person with $2,800 in debts and $8,000 monthly income has a 35% DTI.
What lenders want
For mortgages, many lenders prefer a back-end DTI of 36% or less, though approvals up to 43%–50% are possible depending on the program and compensating factors. Front-end ratio, which looks at housing costs only, is often limited to around 28%.
Ways to lower DTI
Pay down revolving balances, avoid new loans before applying, increase income, refinance to a lower payment or add a qualified co-borrower. Even small reductions can improve eligibility and pricing.
Try the numbers
Use our Debt-to-Income Ratio Calculator to see this in practice. With its default example (Gross monthly income: $7,500; Rent or mortgage: $1,900; Auto loans: $400), it shows back-end dti: 36.67%. Adjust the inputs to match your situation.
Key takeaways
- DTI = monthly debt payments ÷ gross monthly income.
- Below 36% is considered healthy by most lenders.
- Pay down balances and avoid new debt before applying.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.