What Is a Good Debt-to-Income Ratio? Limits, Formula, Examples
Short answer: a good debt-to-income ratio is generally 36% or lower, and many lenders become cautious above about 43%. The ratio is your total monthly debt payments divided by your gross monthly income. With $2,500 of monthly debt payments on $6,000 of gross income, your debt-to-income ratio is 41.7%. Paying off a $350 car payment would bring it down to 35.8%.
Key takeaways
- Debt-to-income (DTI) is monthly debt payments divided by gross monthly income, shown as a percentage.
- 36% or lower is commonly seen as healthy, and 43% is a frequently cited upper reference point. Limits vary by lender and loan type.
- Lenders often look at two numbers: a front-end ratio (housing only) and a back-end ratio (all debts).
- You can lower DTI by paying off debt, raising income, or choosing a smaller loan. Removing one payment can move it several points.
How do you calculate debt-to-income ratio?
- Add your monthly debt payments. Rent or mortgage (with taxes and insurance, for a mortgage), car loans, student loans, minimum card payments and personal loans. Leave out groceries, utilities and phone.
- Find your gross monthly income. Before tax. Divide your annual pay by 12.
- Divide the debts by the income and multiply by 100.
An example with $6,000 of gross monthly income:
| Payment | Monthly amount |
|---|---|
| Housing (mortgage, tax, insurance) | $1,800 |
| Car loan | $350 |
| Student loan | $250 |
| Card minimums | $100 |
| Total debt payments | $2,500 |
The back-end ratio is $2,500 divided by $6,000, which is 41.7%. The front-end ratio, housing only, is $1,800 divided by $6,000, which is 30%. If the car loan were paid off, total debt would be $2,150 and the back-end ratio would be 35.8%.
What counts as a good ratio?
| Back-end DTI | How it is often read |
|---|---|
| Up to 36% | Healthy. Most lenders are comfortable. |
| 37% to 43% | Manageable but tight. Approval may depend on credit and savings. |
| Above 43% | High. Some lenders decline, others allow more with strong credit or savings. |
| Above 50% | Very high. Debt takes half of income, and there is little room for a shock. |
For housing alone, the front-end target is commonly 28%. Together these are the "28/36 rule". Lenders and loan programmes set their own limits, and some allow higher ratios, so treat these figures as reference points, not rules. A lender's decision also depends on your credit score, savings and down payment.
How much debt can you carry at a given income?
This table shows the largest total monthly debt payment at the 36% and 43% reference points:
| Gross monthly income | Debt payments at 36% | Debt payments at 43% |
|---|---|---|
| $4,000 | $1,440 | $1,720 |
| $6,000 | $2,160 | $2,580 |
| $8,000 | $2,880 | $3,440 |
| $10,000 | $3,600 | $4,300 |
These show what a lender might allow, not what is comfortable. A ratio of 43% leaves 57% of gross income for tax, food, saving and everything else. For your own situation, consider your take-home pay and your goals. See why DTI does not tell the whole story and the DTI stress test for rising rates.
How do you lower your debt-to-income ratio?
- Pay off a loan, starting with those that remove a whole payment. In the example, clearing the $350 car loan cut the ratio by almost six points.
- Pay down cards, which lowers the minimum payments. See the debt payoff plan and how to pay off credit card debt fast.
- Raise income. A raise or a side income increases the bottom of the fraction. See how to start a side income.
- Avoid new debt before applying for a mortgage.
- Refinance or lengthen a loan to lower the monthly payment, though this can raise the total interest.
- Buy a smaller home or put more down. See how long it takes to save a down payment.
Does DTI affect your credit score?
No. Your debt-to-income ratio is not part of your credit score, because credit reports do not include income. Lenders calculate it themselves when you apply. Your credit utilisation, the share of card limits you use, does affect the score. See how to build credit.
Sources and further reading: the Consumer Financial Protection Bureau explains debt-to-income ratio and how mortgage lenders use it.
General education, not financial advice. Reviewed October 2026. The reference points of 28%, 36% and 43% are widely used but lenders set their own limits, which vary by loan type and over time. The example uses made-up figures.
Frequently asked questions
What is a good debt-to-income ratio?
Generally 36% or lower. Many lenders become cautious above about 43%. Divide total monthly debt payments by gross monthly income: $2,500 on $6,000 is 41.7%.
How do I calculate my debt-to-income ratio?
Add your monthly debt payments, including rent or mortgage, car, student and card minimums, divide by your gross monthly income and multiply by 100. Leave out groceries, utilities and phone bills.
What debt-to-income ratio do I need for a mortgage?
Many lenders look for 43% or lower overall and about 28% for housing alone, but limits vary by lender and loan type. Strong credit, savings or a larger down payment can sometimes allow a higher ratio.
Does debt-to-income ratio affect my credit score?
No. Credit reports do not include income, so DTI is not part of the score. Lenders calculate it separately when you apply. Credit utilisation does affect the score.
How can I lower my debt-to-income ratio quickly?
Pay off a whole loan to remove its payment, pay down card balances, avoid new debt, and raise income. In the example, paying off a $350 car loan cut the ratio from 41.7% to 35.8%.