Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward debt payments. It doesn't appear on your credit report and doesn't affect your credit score — but lenders use it alongside your score to determine whether you can afford new debt.
How to Calculate DTI
DTI = Total Monthly Debt Payments ÷ Gross Monthly Income × 100
Example: You earn $5,000/month gross and your monthly debt payments are:
- Rent/mortgage: $1,200
- Car payment: $400
- Student loan: $200
- Credit card minimums: $100
- Total: $1,900
DTI = $1,900 / $5,000 = 38%
What Counts as "Debt" for DTI
- Mortgage or rent payment
- Auto loan payments
- Student loan payments
- Credit card minimum payments
- Personal loan payments
- Child support or alimony
- Any other minimum monthly debt obligations
What doesn't count: Utilities, insurance, phone bills, groceries, subscriptions, and other non-debt expenses.
What DTI Do Lenders Want?
Most lenders consider this a comfortable DTI. Best loan terms available.
Still qualifies for most loans. 43% is the maximum for most conventional mortgages.
FHA loans may approve up to 50% with compensating factors. Most other lenders say no.
Almost no lender will approve new debt. Focus on reducing existing obligations.
Preparing for a major purchase? Let's get your credit AND your DTI in shape.
Book Free ConsultationHow to Lower Your DTI
Two approaches — reduce debt or increase income:
Reduce Debt
- Pay off credit cards: Eliminating a card's minimum payment reduces DTI and improves utilization
- Pay off small loans: Eliminating a $200/month car or personal loan payment can significantly change your DTI
- Consolidate debts: If consolidation lowers your total monthly payment, DTI improves
- Refinance: Extending a loan term lowers the monthly payment (though you pay more interest over time)
Increase Income
- Side income, freelancing, or overtime
- Adding a co-borrower with income (for mortgage applications)
- Documenting all income sources (bonuses, commission, rental income)
DTI vs. Credit Score: Both Matter
When you apply for a mortgage or major loan, lenders look at both your credit score and your DTI. You could have a 780 credit score and still be denied if your DTI is 60%. Conversely, a 680 score with a 28% DTI might get approved where a 720 score with 50% DTI won't.
Related Articles
This article is for educational purposes and does not constitute legal or financial advice. Individual results vary. Contact us for a personalized assessment.