Figuring out your DTI is simple math: your total monthly debt payments divided by your gross monthly income (your wages before taxes and other deductions are taken out). Let’s break that down.

You don’t need to factor in common living expenses (like utilities and food) or paycheck deductions (like health insurance or 401(k) contributions). But you should include all types of debt, like:

•    Mortgage payments
•    Car loans
•    Student loans
•    Medical bills
•    Credit card payments
•    Personal loans
•    Timeshare payments

You’ll also include recurring monthly payments—like rent, child support or alimony—even though they aren’t technically considered debt. 

Confusing? We get it (because it is). But think about it like this—to get an accurate picture of how much you’re spending each month, lenders look at more than just your debt to decide if they’ll approve you for new credit.

So, to sum it up, include all your monthly minimum debt payments and recurring or legally binding payments in your debt-to-income ratio—but not basic monthly bills. 

Don’t forget to include any money that comes in on an average month. Think about your salary or wages, tips, bonuses, child support, alimony, pensions or Social Security.

Let’s look at an example:

Bob pays $600 a month in minimum debt payments (for student loans and a car payment) plus $1,000 per month for his mortgage payment. Before taxes, Bob brings home $5,000 a month. To calculate his DTI, add up his monthly debt and mortgage payments ($1,600) and divide it by his gross monthly income ($5,000) to get 0.32. Multiply that by 100 to get a percentage. 

So, Bob’s debt-to-income ratio is 32%.

Now, it’s your turn. Plug your numbers into our debt-to-income ratio calculator above and see where you stand.
 

Now that you know how a debt-to-income ratio is calculated, you might be wondering what lenders think of your score. 

The criteria can vary from lender to lender, but here’s a general breakdown of the industry standards: 

DTI less than 36%
Lenders view a DTI under 36% as good, meaning they think you can manage your current debt payments and handle taking on an additional loan.

DTI between 36–43%
In this range, lenders get nervous that adding another loan payment to your plate might be challenging, especially if an emergency pops up. You won’t necessarily get turned down for another loan, but lenders will proceed with caution. 

DTI between 43–50%
When your DTI gets to this level, you’re almost too risky for lenders, and you may not be able to get a loan.

DTI over 50%
At this point, you’re in the danger zone, and lenders probably won’t lend you money. With a DTI ratio over 50%, that means over half of your monthly income is going to pay debt. Add in normal living expenses, like groceries and insurance, and there’s not much left over for saving or covering an emergency—and another loan could tip you over the edge.  
 

According to traditional lenders, a good DTI ratio is under 36%, but some will still lend money—possibly with extra stipulations (rules) or higher interest rates—up to 50%.

But listen—just because your DTI ratio is considered good by industry standards and you qualify for another loan, it doesn’t mean you should take it on.

Debt steals from you now and it steals from your future. And your income is your most important wealth-building tool. So if you’re putting any amount of that income toward debt, you aren’t using your money to get ahead. You can’t move forward when you’re constantly paying for the past.

The bottom line? Don’t focus so much on the number—focus on tackling the debt, fast.
 

When applying for a mortgage, lenders will look at two different types of DTIs—a front-end ratio and a back-end ratio. 
 
Front-end ratio:
A front-end ratio only includes your total monthly housing costs—like your rent, mortgage payment, monthly homeowners association fees, property taxes, and homeowner’s insurance. Lenders prefer your max front-end ratio to be 28% or lower, but if you’re following our plan, your total housing costs shouldn’t be more than 25% of your take-home pay.

Back-end ratio:
A back-end ratio includes your monthly housing costs plus any other monthly debt payments you have, like credit cards, student loans or medical bills. Lenders typically use the back-end-ratio because it gives a more accurate picture of your average monthly payments.

What is the debt-to-income ratio to qualify for a mortgage? 
Generally, lenders prefer your back-end ratio to be below 36%, but some will allow up to 50% when applying for a mortgage. 

But wait just a second. Before you apply for a mortgage loan, a better question to ask is, “How much house can I afford?” When you’re buying a house, it’s easy to get excited and take on more than your budget can actually handle. And we don’t want that for you! Use our mortgage calculator to make sure you don’t get in over your head. 

If looking at your debt-to-income ratio made your blood pressure rise a little, take a breath. You actually have more control over that number than you might think. If you want to lower your DTI, you need to decrease your monthly debt or increase your monthly income. Or both. 

Here are a few practical tips to lower your debt-to-income ratio:

Don’t take on any more debt.
A perfect new couch that’s calling your name? That boat you’ve been eyeing for years? Nope. And nope. Taking on more debt will just make your DTI percentage rise (and also your stress level). Don’t be tempted to add any more payments to your plate. Work on getting rid of the payments you already have.

Earn additional income.
Negotiate a higher salary. Pick up a few extra hours. Start some freelance work. Anything you can do to earn more income will help lower your DTI. But don’t just earn more money for the sake of improving your debt-to-income ratio. Use that extra cash to pay off more debt. 

Throw more money at your debt than just the minimum payment. 
Minimum payments = minimal progress. Seriously, if you’re only paying your minimum payments, those balances will hang around forever. And nobody wants that. To pay off debt faster, start by tackling the smallest debt first, not the one with the highest interest rate (we call this the debt snowball method). When you use the debt snowball method, you’ll get quick wins and see progress on that debt right away—which will keep you motivated to pay off the rest even faster.

Get on a budget.
No, just using an amazing budgeting app (like our fave, EveryDollar) won’t make your DTI magically shrink. But what a budget will do is help you visually see where your money is going each month and track where you’re overspending. If you make adjustments to those areas, you’ll have more money to throw at your debt every single month—which will lower your DTI (and get you closer to a life without debt at all). 
 

A lot of companies will say that keeping your debt at a level you can manage is a sign of good financial health. But let’s be honest. Even if your DTI ratio is considered good at 36%, that still means over a third of your paycheck is going to stuff you don’t own. Sure, it might be manageable by a lender’s standards, but do you really want that much of your paycheck going in someone else’s pocket?

The truth is, lenders aren’t helping you out by accepting your loan application. The interest you pay on the loan is actually helping them out. You continue to feel like the current is pulling you under, and they profit off of you staying there.

So, don’t ask, “Can I take on another payment?” Instead, ask, “Do I want to be even more strapped than I am right now?”

Just think—if you didn’t have any of those payments at all, how much more breathing room would you have in your finances? In your life?

The real sign of financial health (and freedom!) is you being in control of your money—100% of your paycheck going into your account. So you can save more, spend without worry, and build the future you really want—without owing anyone a thing.