Debt-to-Income Ratio: How to Calculate It and What Lenders Want

Calculate your front-end and back-end debt-to-income ratios the way lenders do, see what limits they look for, and how to improve your DTI.

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Free tool: Debt-to-Income Ratio Calculator

Your debt-to-income ratio (DTI) is one of the first numbers a lender checks for a mortgage, car loan or personal loan. It shows how much of your income already goes to debt payments, and therefore how much room you have for a new one. This guide explains how to calculate it and what the limits are, using the free Debt-to-Income Ratio Calculator.

The two ratios

  • Front-end DTI (housing ratio) = housing payment ÷ gross monthly income. The housing payment includes the mortgage or rent, property tax, insurance and HOA fees.
  • Back-end DTI = all monthly debt payments, including housing, ÷ gross monthly income. This is the number most lenders focus on.

Use gross income, before taxes and deductions, and minimum required payments, not what you choose to pay.

Example

Gross income of $6,000 a month, with:

  • Rent or mortgage: $1,500
  • Car loan: $400
  • Student loans: $300
  • Credit card minimums: $100

Front-end DTI: $1,500 ÷ $6,000 = 25%. Back-end DTI: $2,300 ÷ $6,000 = 38.3%.

Everyday costs such as utilities, groceries, insurance premiums and phone bills don't count.

What lenders look for

  • 36% or less: generally comfortable.
  • Up to 43%: a common ceiling for mortgages, though some programs allow up to 50% with strong credit and savings.
  • Above 50%: most lenders will decline or require a co-signer.

In the example, 38.3% is manageable but above 36%; there's $280 a month of room before reaching 43%.

How to lower your DTI

  • Pay down balances, starting with debts that have high minimum payments relative to the balance, such as a small car loan near its end.
  • Avoid new debt before applying for a mortgage.
  • Increase income, including documented side income lenders will count.
  • Refinance or consolidate to lower monthly payments, though stretching the term can cost more interest; see Does Debt Consolidation Save Money?

To see what home price your income supports, see How Much House Can I Afford?

How to use the Debt-to-Income Ratio Calculator

  1. Open the Debt-to-Income Ratio Calculator.
  2. Enter your gross monthly income.
  3. Enter your rent or mortgage payment, including property tax, insurance and HOA fees.
  4. Enter your other monthly debt payments: car loans, student loans, credit card minimums, personal loans and other debts such as child support.
  5. Read the results: your back-end and front-end ratios, your total monthly debt payments and the room left under 36% and 43%, with a chart of your monthly debt payments.

Frequently asked questions

How do I calculate my debt-to-income ratio?

Add up your monthly debt payments, including housing, and divide by your gross monthly income. $2,300 of payments on $6,000 of income is 38.3%.

What is a good debt-to-income ratio?

36% or less is generally considered healthy. Many mortgage lenders accept up to 43%, and some up to 50% with strong credit.

Does rent count in debt-to-income ratio?

Yes, for your current DTI. When you apply for a mortgage, the lender replaces your rent with the new housing payment.

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