Borrowing
What Is a Good Debt-to-Income Ratio?
Your DTI is monthly debt payments divided by gross monthly income. Learn how to calculate it, what counts, and the ranges lenders tend to prefer.
Quick answer
In one sentence
A good debt-to-income ratio is generally 36% or below, counting all monthly debt payments against your gross monthly income. Many lenders will go higher, but a lower DTI leaves more room in your budget and more borrowing options.
Your debt-to-income ratio, or DTI, is one of the most important numbers in lending, and one of the simplest to calculate. The Consumer Financial Protection Bureau defines it plainly: "Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income." That single ratio tells a lender how much of your income is already committed before you take on a new loan.
Gross monthly income, the CFPB notes, is "generally the amount of money you have earned before your taxes and other deductions are taken out." So if you have $2,000 in monthly debt payments and $6,000 in gross monthly income, your DTI is 33 percent — the exact example the CFPB uses. The lower the ratio, the more of your income is free, and the more comfortable a lender tends to be.
How to calculate your DTI
Add up the required monthly payments on your debts, then divide by your gross monthly income. On the debt side, include the payments a lender sees on your credit report and application: rent or mortgage, car loans, student loans, minimum credit card payments, personal loans, and court-ordered obligations like child support. On the income side, use your gross (pre-tax) monthly income from all reliable sources.
Here's the arithmetic from the CFPB's own example: $2,000 of monthly debt divided by $6,000 of gross monthly income equals 0.33, or 33 percent. Importantly, DTI counts the monthly payment, not the total balance you owe — a $30,000 car loan with a $450 payment contributes $450 to the calculation, not $30,000.
- Count: housing payment, auto loans, student loans, minimum credit card payments, personal loans, child support or alimony.
- Usually don't count: utilities, groceries, phone bills, insurance premiums, and other everyday living expenses.
- Use gross income: your pay before taxes and deductions, not your take-home pay.
What counts as a good DTI
The CFPB is careful to say that "different loan products and lenders will have different DTI limits," and it does not publish a single pass/fail number. That caution is the honest answer: there is no universal cutoff. But lenders and financial educators commonly work with a few reference bands, and knowing them helps you read your own number.
A widely used convention treats a DTI at or below 36 percent as comfortable, the 37–43 percent range as workable but tighter, and ratios above 43 percent as the zone where fewer loan options remain and approval gets harder. A related rule of thumb for mortgages, the "28/36 rule," suggests keeping housing costs under about 28 percent of gross income and total debt under about 36 percent. Treat these as planning guides, not guarantees — they are conventions, not a CFPB rule.
One historical note worth clearing up: you may read that 43 percent is a hard legal ceiling for mortgages. That figure came from an older version of the "Qualified Mortgage" rule and was replaced in 2021 by a price-based standard, so a DTI above 43 percent is not automatically disqualifying today. Lenders still scrutinize higher ratios, but the strict 43 percent line is outdated.
Front-end vs. back-end DTI
Mortgage lenders often look at two versions of the ratio. The front-end (or housing) ratio counts only your housing payment — principal, interest, taxes, insurance, and any HOA dues — against gross income. The back-end ratio counts all your monthly debts, including housing. The back-end ratio is the one most people mean by "DTI," and it is the broader test.
The two ratios answer different questions. The front-end number asks whether the house alone is affordable; the back-end number asks whether the house plus everything else leaves you room to breathe. A borrower can pass one and fail the other, which is why lenders look at both.
How to improve your ratio
Because DTI is a fraction, you can improve it from either side: shrink the top (monthly debt payments) or grow the bottom (gross income). Paying off a small loan with a large monthly payment can move the needle more than you'd expect, since DTI cares about the payment rather than the balance. Avoiding new debt in the months before a mortgage application keeps the ratio from creeping up.
On the income side, documented raises, a second income source, or bonus income a lender will count can all lower the ratio. The most reliable approach before a big loan is to map out every monthly payment, see exactly where your number lands, and then decide whether to pay something down or wait — rather than guessing and hoping.
Put the numbers to work
Use these free calculators to apply what this article covers to your own situation.
Key terms in plain English
- Debt-to-income ratio (DTI)
- All your monthly debt payments divided by your gross monthly income, shown as a percent. A core measure lenders use to judge how much new debt you can handle.
- Gross monthly income
- Your income before taxes and other deductions. DTI uses gross income, not take-home pay.
- Front-end ratio
- Housing costs alone (principal, interest, taxes, insurance, HOA) divided by gross income. Sometimes called the housing ratio.
- Back-end ratio
- All monthly debt payments, including housing, divided by gross income. This is what most people mean by DTI.
- 28/36 rule
- A budgeting convention suggesting housing costs stay under ~28% of gross income and total debt under ~36%. A guideline, not a legal requirement.
Frequently asked questions
What is a good debt-to-income ratio?
As a common guideline, 36% or below is considered comfortable, 37–43% is workable but tighter, and above 43% limits your options. There's no single official cutoff — the CFPB notes that different lenders and loan products set different DTI limits.
How do I calculate my DTI?
Add up your required monthly debt payments (housing, car, student loans, minimum card payments, etc.) and divide by your gross monthly income. For example, $2,000 of debt payments divided by $6,000 of gross income is a 33% DTI.
Does DTI use gross or net income?
Gross income — your pay before taxes and deductions. Using take-home pay would overstate your ratio and isn't how lenders calculate it.
Is 43% DTI still the mortgage limit?
Not as a hard rule. The 43% figure came from an earlier Qualified Mortgage standard that was replaced in 2021 by a price-based test. Lenders still look closely at higher ratios, but above 43% is no longer an automatic disqualification.
What debts count toward DTI?
Recurring debt payments a lender sees on your application: rent or mortgage, auto loans, student loans, minimum credit card payments, personal loans, and obligations like child support. Everyday costs like utilities, groceries, and phone bills usually don't count.
Source and editorial note
For current background, review CFPB — What is a debt-to-income ratio?. Official rules and product documents control when they differ from this educational explanation.
Need help with unfamiliar language? Use the financial calculator glossary for definitions and links to related tools.
Prepared by Loan Lyze Editorial under our editorial policy. This article is educational and is not financial, tax, legal, insurance, or investment advice.