What Is a Good Debt-to-Income Ratio?
Your debt-to-income ratio, or DTI, compares your monthly debt payments with your gross monthly income. Lenders use it to judge whether you can handle another loan. It is one of the simplest ways to see how stretched your budget is.
Key points
- DTI equals total monthly debt payments divided by gross monthly income.
- Include housing, car loans, student loans, card minimums, and other required debt payments.
- Many lenders prefer 36% or lower, and 43% is a commonly cited ceiling for mortgages, though limits vary.
- You can lower DTI by paying down debt or raising income.
A worked example
With $6,000 of gross monthly income and $2,450 in monthly debt payments, DTI is about 40.8%. To reach 36%, total payments would need to fall to $2,160, which is about $290 less a month. Paying off the $280 student loan alone would bring DTI to about 36.2%, and a small extra cut would reach 36%.
Common mistakes
People often use take-home pay instead of gross pay, which inflates the ratio. Others leave out card minimums. Use gross income, and include every required payment, to match how lenders calculate it.
Try the calculators
Debt-to-income ratio
See what share of income goes to debt.
Mortgage affordability
Estimate how much house fits your income.
Rent affordability
See how much rent fits your income.
Frequently asked questions
Do utilities and groceries count?
No. DTI counts debt payments, not living expenses.
What counts as a high DTI?
Above roughly 43% many lenders become cautious, but standards differ by loan type and lender.