What Is a Good Debt-to-Income Ratio?

Where does your ratio actually fall?

Debt-to-income ratio, or DTI, is your total minimum monthly debt payments divided by your gross monthly income, shown as a percentage. Add up every required payment, your mortgage or rent only if you're applying with it attached, car loans, student loans, personal loans, and the minimum due on every credit card, then divide by what you earn before taxes.

The table below sorts that number into the same three bands a lender works from: Fannie Mae's standard 36% cap for conventional loans underwritten by hand, the stretch up to 43% and beyond where the CFPB's Qualified Mortgage rule starts to apply, and the comfortable range Experian calls out under 35%. Where you land changes what a lender will offer, not just whether they'll say yes.

How do you calculate your own number?

Start with your gross monthly income from a recent pay stub, then list every recurring debt payment with a fixed due date and minimum amount. What counts as debt? A plain list for your inventory is a useful checklist if you're unsure whether something like a 0%-financed phone or a loan from a family member belongs in that total.

Divide the debt total by the income total and move the decimal two places to read it as a percentage. Lenders usually run this math twice, once for the new loan payment alone and once for every debt you're carrying plus the new payment, and it's that second, fuller number the bands below are describing.

What should you do if your ratio lands in the middle band?

A DTI between roughly 36% and 43% usually still gets approved, just with a lender holding less room to work with on terms. The fastest way to move out of that band before you apply is to retire a recurring payment entirely rather than just making a larger dent in a balance, since closing out one debt removes its whole minimum payment from the ratio instead of shrinking it.

A debt payoff plan built around your actual balances, rates and minimums shows which account is closest to paid off and how long that takes at a given monthly budget, which is a more useful question than making extra payments at random.

What happens if your DTI is already above 43%?

A DTI above 43% doesn't rule out every loan. Fannie Mae's own Selling Guide allows conventional loans with a DTI as high as 45% for borrowers with strong credit and cash reserves, and up to 50% when the loan runs through its automated underwriting system, while FHA loans built around different rules can go higher still in some cases.

A personal loan runs into DTI the same way a mortgage does. How to Get a Personal Loan: A Step-by-Step Guide covers the credit and income checks a lender runs before quoting a rate, and a high DTI is one of the things that pushes that quoted rate up even when you're still approved.

Common questions

Is a 43% DTI too high to get approved for a mortgage?

Not automatically. 43% is the threshold the CFPB's original Qualified Mortgage rule was built around, but Fannie Mae's own guidelines allow conventional loans above that with strong credit scores and cash reserves, and FHA loans run on different limits entirely. A DTI above 43% usually means a narrower set of options, not zero options.

Does my current rent count toward DTI if I'm buying a home?

No. Once you're applying for a mortgage to replace your rent, the rent itself drops out of the calculation and the new mortgage payment takes its place. An auto lender or a new landlord screening a lease application may still count current rent, since they're not replacing it.

Does debt-to-income ratio affect my credit score?

No. Credit bureaus don't have your income, so a lender calculates DTI separately at the time you apply, using the income and debts you report.

What's the fastest way to lower a DTI before applying for a loan?

Paying off an entire account, even a small one, removes its whole minimum payment from the ratio and tends to move the number more than spreading the same extra cash across several balances. Avoiding new financed purchases in the months before you apply matters just as much, since any new minimum payment adds straight to the total.