What is a good debt-to-income ratio?

A DTI of 36% or less is considered good by most lenders. For mortgage qualification, the maximum is typically 43% for conventional loans and up to 50% for FHA loans. The lower your DTI, the better rates you'll receive.

How do you calculate debt-to-income ratio?

Divide your total monthly debt payments by your gross monthly income. For example, if you pay $2,000/month in debts and earn $6,000/month gross, your DTI is 33% ($2,000 ÷ $6,000 = 0.33).

Does rent count in DTI?

Current rent does not count in DTI calculations for mortgage qualifying (since it would be replaced by the mortgage payment). However, if you're keeping a rental property, that payment counts. For other loans, rent may or may not be included.

Debt-to-Income Ratio: What It Is and How to Calculate It (2026)

Your debt-to-income ratio (DTI) is one of the most important numbers in personal finance. Lenders use it to determine whether you can afford a mortgage, and a high DTI can block you from getting approved even with excellent credit.

How to Calculate Your DTI

DTI Formula: Total Monthly Debt Payments ÷ Gross Monthly Income × 100

What Counts as Monthly Debt

Included in DTI	NOT Included
Mortgage or rent payment	Utilities
Auto loan payment	Health insurance
Student loan payment	Groceries and food
Credit card minimum payments	Cell phone bill
Personal loan payments	Subscriptions
Child support / alimony	Gas and transportation
Home equity loan / HELOC	Property taxes (sometimes separate)

DTI Calculation Example

Monthly Debt	Amount
Mortgage	$1,800
Auto loan	$520
Student loans	$380
Credit card minimums	$200
Total monthly debts	$2,900
Gross monthly income	$7,500
DTI	38.7%

DTI Ranges and What They Mean

DTI Range	Rating	Lender Perspective
Under 20%	Excellent	Best rates and easy approval for everything
20–35%	Good	Competitive rates, approved for most products
36–43%	Acceptable	May face restrictions, especially for mortgages
43–50%	High	Difficult to get conventional mortgage; FHA possible
Over 50%	Very High	Most lenders will deny; serious financial stress

DTI Requirements by Loan Type

Mortgages

Loan Type	Max Front-End DTI	Max Back-End DTI	Notes
Conventional	28%	36–45%	Higher DTI possible with strong compensating factors
FHA	31%	43–50%	More flexible on DTI than conventional
VA	No limit*	41% guideline	*Residual income test used instead
USDA	29%	41%	Strict ratios
Jumbo	28%	36–43%	Stricter requirements for larger loans

Front-end DTI: Housing costs only (mortgage + taxes + insurance) ÷ gross income
Back-end DTI: All debts (including housing) ÷ gross income

Other Loans

Loan Type	Typical Max DTI
Auto loan	No hard limit; higher DTI = higher rate
Personal loan	Varies; most prefer under 40%
Credit card	No DTI check for most cards
HELOC	43–50%
Business loan (SBA)	Varies by lender

Average DTI in America

Age Group	Average DTI
Under 25	22%
25–34	37%
35–44	41%
45–54	38%
55–64	30%
65+	22%

DTI peaks during prime working and home-buying years (35-44), when mortgages, student loans, and family expenses overlap.

How DTI Affects Mortgage Rates

Even if you qualify, a higher DTI often means:

DTI	Rate Impact	Approval Likelihood
Under 36%	Best rates	Easily approved
36–40%	Slight markup	Approved with good credit
40–43%	Higher rates	Approved with compensating factors
43–50%	FHA rates	Conventional denied; FHA possible

Compensating factors that let you exceed 43%:

Credit score above 740
Large cash reserves (6+ months)
Strong employment history
Significant assets
Low loan-to-value ratio (large down payment)

Strategies to Lower Your DTI

Reduce the Numerator (Pay Down Debt)

Strategy	Impact on DTI	Example
Pay off credit cards	Eliminates minimum payments	$200/month saved = 2.7% DTI reduction at $7,500 income
Pay off auto loan	Eliminates car payment	$520/month saved = 6.9% DTI reduction
Refinance student loans	Extends term, lowers payment	$380 → $250/month = 1.7% DTI reduction
Consolidate debt	Combines to lower single payment	Varies

Increase the Denominator (Raise Income)

Strategy	Impact
Ask for a raise	Directly lowers DTI
Take on a side income	If documented for 2+ years, lenders count it
Add a co-borrower	Combined income lowers DTI
Demonstrate bonus/commission income	Must show 2-year history

Quick Wins Before Applying for a Mortgage

Pay off small debts — Eliminating a $100/month payment moves your DTI
Don’t take on new debt — Avoid car purchases or new credit cards
Pay down credit cards to $0 — Even though you can use them after closing
Don’t cosign anything — That payment counts against your DTI
Ask about removing student loans — IBR payments of $0 may be excluded by some lenders

DTI Calculator Example

Here’s how different debt reduction strategies affect mortgage qualifying:

Starting point: $90,000 household income ($7,500/month), $2,900 in monthly debts, DTI = 38.7%

Action	New Monthly Debts	New DTI	Max Mortgage Payment
Starting point	$2,900	38.7%	$325 (at 43% cap)
Pay off credit cards (-$200)	$2,700	36.0%	$525
Also pay off car (-$520)	$2,180	29.1%	$1,045
Also refinance student loans (-$130)	$2,050	27.3%	$1,175

By reducing debts from $2,900 to $2,050, the maximum affordable mortgage payment increases from $325 to $1,175 — a massive difference in home buying power.