Your credit score gets all the attention, but lenders care just as much about another number: your debt-to-income ratio (DTI). It's the simplest measure of whether you can handle more debt — and it can make or break your mortgage approval.
The good news: unlike credit scores, you can dramatically improve your DTI in just a few months.
How to Calculate Your DTI
DTI = Total monthly debt payments ÷ Gross monthly income × 100
Example:
- Gross monthly income: $6,000
- Mortgage/rent: $1,500
- Car payment: $400
- Student loans: $300
- Credit card minimums: $150
- Total debt payments: $2,350
DTI = $2,350 ÷ $6,000 = 39.2%
Use our DTI Calculator to calculate yours in seconds.
What Counts (and Doesn't Count) as Debt
Counts toward DTI:
- Mortgage or rent payment
- Car loans/leases
- Student loan payments
- Credit card minimum payments
- Personal loans
- Child support/alimony
- Any loan payment on your credit report
Does NOT count:
- Utilities (electric, water, internet, phone)
- Groceries and food
- Health insurance premiums
- Subscriptions (Netflix, gym, etc.)
- Transportation costs (gas, maintenance)
- Taxes (unless you owe back taxes with a payment plan)
DTI Thresholds That Lenders Use
| DTI Range | What It Means |
|---|---|
| Under 36% | Excellent. You'll qualify for the best rates and terms. |
| 36-43% | Acceptable. Most lenders will approve you, but not at the best rates. |
| 43-50% | Risky. FHA loans allow up to 43%; some lenders stretch to 50% with strong compensating factors. |
| Over 50% | Denied. Very few lenders will approve. Focus on reducing debt before applying. |
The magic number for mortgages: 43%. This is the maximum for most conventional loans and the hard cutoff for "Qualified Mortgages" under federal rules.
How to Lower Your DTI
You have two levers: reduce debt payments or increase income.
Reduce debt payments:
- Pay off credit cards (biggest impact per dollar since minimum payments drop)
- Pay off a car loan
- Refinance student loans to a lower payment (longer term = lower monthly, but more total interest)
- Consolidate debts into a single lower-payment loan
Increase income:
- Ask for a raise (documented income helps DTI)
- Add a part-time job or side hustle (needs 2+ years of history for lenders to count it)
- Include a co-borrower's income (spouse, partner)
Quick win example: Paying off a $5,000 credit card with a $150/month minimum reduces your DTI by 2.5 percentage points (on $6,000 income). That could be the difference between approval and denial.
Frequently Asked Questions
They're equally important but serve different purposes. Credit score shows your history of managing debt (will you pay?). DTI shows your current capacity to take on more debt (can you pay?). A 780 credit score with 55% DTI will still get denied. A 660 credit score with 30% DTI has a much better chance.
Your current rent is NOT counted in DTI when applying for a mortgage — because the mortgage payment will replace it. The lender uses the proposed mortgage payment instead. This means your DTI might actually go up or down depending on whether your mortgage is higher or lower than your rent.
DTI can change immediately — it's based on current monthly payments, not historical data like credit scores. Pay off a credit card today, and your DTI drops tomorrow. This makes it one of the fastest financial metrics to improve.
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