Debt-to-income ratio (DTI), what it is and how to calculate it
What the debt-to-income ratio is, which debts count, the difference between front-end and back-end DTI, how lenders use it and how to lower it.
Quick answer
Your debt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments: debt payments ÷ gross income × 100. Example: $1,970 in debt payments on $6,000 of income is a 32.8% DTI. Lenders use it, especially for mortgages, and each loan program sets its own criteria.
Key takeaways
- DTI = monthly debt payments ÷ gross monthly income × 100.
- Example: $1,970 in debt on $6,000 income = 32.8%.
- Front-end (housing) vs. back-end (all debt) DTI.
- Each lender and program sets its own limits.
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes to debt payments. It is one of the numbers lenders watch most closely, especially for mortgages, because it shows how much room you have to take on a new payment.
How to calculate DTI
DTI = monthly debt payments ÷ gross monthly income × 100
Gross income is before taxes and deductions.
Example:
| Item | Monthly amount |
|---|---|
| Rent | $1,500 |
| Auto loan | $350 |
| Credit card minimum payments | $120 |
| Total debt payments | $1,970 |
| Gross income | $6,000 |
| DTI | 32.8% |
Run your own numbers in the debt-to-income calculator.
What counts as debt
Usually included:
- Mortgage or rent payment (for a mortgage, lenders use the future payment on the home you are buying)
- Auto, student and personal loans
- Credit card minimum payments
- Court-ordered alimony or child support you pay
Usually not included:
- Groceries, utilities, gas, health insurance, phone
- Entertainment
Each lender defines exactly what it includes, so ask before you apply.
Front-end vs. back-end DTI
- Front-end DTI: housing payment only, divided by gross income.
- Back-end DTI: all debt payments, including housing.
In the example, front-end DTI is $1,500 ÷ $6,000 = 25%, and back-end DTI is 32.8%.
What DTI do lenders accept?
There is no single number. Each loan type and each lender has its own criteria, and they combine DTI with other factors such as your credit history, savings, down payment and income stability. In general, a lower DTI means more options and less risk of a tight budget.
So rather than looking for “the limit,” ask: what payment can I comfortably sustain, even if something unexpected happens?
How to lower your DTI
There are two paths: lower your debt payments or increase your documented income.
- Pay off debts with high payments and small balances. Paying off a small loan removes its whole payment from the calculation.
- Reduce credit card balances: the minimum payment usually falls with the balance.
- Do not open new credit before applying for a mortgage.
- Document all of your income. If you are self-employed, lenders usually rely on your tax returns, so the income you report matters.
- Consider a less expensive home or a larger down payment to lower the monthly payment.
DTI is useful for you, too
Even if you are not applying for a loan, calculating your DTI once a year is a good financial checkup. If a large share of your income is committed to debt, your ability to save and absorb surprises is lower. For the full homebuying picture, read what to check before you apply for a mortgage.
Frequently asked questions
How do I calculate my debt-to-income ratio?
Add up your monthly debt payments, divide by your gross monthly income and multiply by 100.
Which debts count in DTI?
Mortgage or rent, auto, student and personal loans, credit card minimums and court-ordered support. Groceries and utilities do not count.
What is a good DTI for a mortgage?
There is no single number; each program and lender has its own criteria. In general, a lower DTI gives you more options.
How can I lower my DTI fast?
Pay off small debts with high payments, reduce card balances, avoid new credit and document all of your income.
Sources
- What is a debt-to-income ratio? Consumer Financial Protection Bureau
- Your Money, Your Goals - Debt-to-income worksheet (PDF) Consumer Financial Protection Bureau
This article is general and educational; it is not personalized financial, legal or tax advice. Financial product terms change: always confirm current terms with the institution.