What DTI actually measures
Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income (before taxes), expressed as a percentage. If you pay $2,200 a month toward debt and earn $6,000 a month gross, your DTI is about 37%.
The key word is payments. DTI doesn't care how much you owe in total — it cares how much of each paycheck is already spoken for. That distinction is why lowering a monthly payment (even without reducing the balance) can improve your ratio.
What counts as a good DTI
- 36% or below — comfortable. You generally qualify for credit at good rates.
- 37%–43% — workable, but near the edge. 43% is the common ceiling for a qualified mortgage.
- 44%–50% — high. Expect tougher approvals and pricier rates.
- Over 50% — more than half your gross income is committed to debt; this is where a structured payoff plan matters most.
The 28/36 rule
A classic lender guideline: spend no more than 28% of gross income on housing (the front-end ratio) and no more than 36% on total debt (the back-end ratio). It's not a law, and many loans allow higher, but it's a clean target to aim for.
Find your number
See your DTI, how lenders rate it, and exactly how much to cut debt or grow income to hit 36%.
How to lower your DTI
You can attack either side of the fraction:
- Shrink the monthly payments. Pay off a small loan entirely (removing its whole payment helps more than chipping at a big one). Or lower a payment via a consolidation loan — though watch that it doesn't raise your total cost.
- Avoid new debt before a big application. A new car loan right before a mortgage can sink your approval. Don't open new accounts in the months leading up to it.
- Grow the income side. A raise, a side income, or documenting all eligible income can move the ratio without touching your debt.
- Time it. If you're close, paying one balance to zero just before applying can be the difference between approval and denial.