Your Debt-to-Income (DTI) ratio is a personal finance measure that compares your total monthly debt payments to your gross monthly income. In simple terms, it tells you exactly what percentage of your paycheck goes toward paying off what you owe before taxes are taken out.
Lenders—including mortgage providers, auto loan financiers, and credit card companies—use this number to evaluate your financial health. A lower DTI indicates a good balance between debt and income, meaning you are a safer bet for a new loan.
Our calculator does the heavy lifting for you, but the math behind it is straightforward. To find your DTI, simply divide your total monthly recurring debt by your gross monthly income, then multiply by 100 to get a percentage.
The Formula:
(Total Monthly Debt Payments / Gross Monthly Income) * 100 = DTI Ratio
Mortgage or rent payments
Auto loans
Minimum credit card payments
Student loans and personal loans
Child support or alimony
Note: Regular living expenses like groceries, utilities, health insurance, and streaming subscriptions are not included in your DTI calculation.
While different lenders have different strictness levels, most follow the industry-standard 28/36 Rule. This rule suggests that a household should spend a maximum of 28% of its gross monthly income on total housing expenses, and no more than 36% on all debt combined.
Here is how lenders generally view your DTI ratio:
| DTI Ratio | Lender View | What It Means For You |
| 36% or Less | Excellent | You have plenty of breathing room. You will likely get the best interest rates and easily qualify for new credit. |
| 37% to 43% | Fair | You are still in safe territory, but some strict lenders might ask for a larger down payment or offer slightly higher rates. |
| 44% to 50% | Warning Zone | You may struggle to get approved for a mortgage. Lenders see you as a higher risk for defaulting on a loan. |
| 50% or Higher | Danger Zone | You have very little money left over each month. Most lenders will require you to pay down debt before approving new credit. |
If your ratio is higher than you'd like it to be, don't panic. You can improve your DTI by focusing on the two halves of the equation: lowering your debt or increasing your income.
Pay Off Small Balances: Use the "debt snowball" method to clear out small credit card balances. Eliminating a $50/month minimum payment directly lowers your total monthly debt.
Consolidate High-Interest Debt: If you have multiple credit cards, a debt consolidation loan might bundle them into a single, lower monthly payment.
Increase Your Gross Income: Picking up a side hustle, asking for a raise, or taking on overtime increases the bottom half of the DTI equation, instantly improving your ratio.
Your DTI ratio is a personal finance metric that compares your total monthly debt payments to your gross monthly income. It shows lenders exactly what percentage of your pre-tax income goes toward paying off debt each month.
You should only include fixed, recurring debt payments. This includes your mortgage or rent, auto loan payments, minimum monthly credit card payments, student loans, personal loans, and any court-ordered payments like child support or alimony.
No. Standard living expenses and utility bills do not count toward your DTI. You should exclude things like groceries, electricity, water bills, cell phone plans, health insurance, and entertainment subscriptions.
Most mortgage lenders look for a DTI ratio of 36% or lower. This follows the industry-standard "28/36 Rule," which suggests that no more than 36% of your gross income should go toward total debt, and no more than 28% should go toward housing. While some lenders may approve loans with a DTI up to 43% or even 50%, keeping it under 36% gets you the best interest rates.
Your DTI ratio does not directly affect your credit score, because credit bureaus do not know your income. However, having high credit card balances (which increases your DTI) does increase your credit utilization rate, which can negatively impact your credit score.
Because DTI is a ratio between your debt and your income, there are only two ways to change it: decrease your debt or increase your income. You can lower your DTI by paying off small credit card balances to eliminate their minimum monthly payments, consolidating multiple debts into a single lower payment, or increasing your gross income through a raise or a side job.
The BestMoney editorial team is composed of writers and experts covering a full range of financial services. Our mission is to simplify the process of selecting the right provider for every need, leveraging our extensive industry knowledge to deliver clear, reliable advice.
