What is debt-to-income ratio (DTI)?
Your debt-to-income ratio compares your monthly debt payments with your gross monthly income (before taxes). Lenders look at two numbers:
- Front-end (housing) ratio – your housing payment divided by gross income. A common guideline is 28% or less.
- Back-end ratio – all monthly debt payments, including housing, car loans, student loans, credit card minimums and other loans, divided by gross income. The classic guideline is 36% or less.
For example, $2,000 of total debt payments on $6,000 of monthly income is a DTI of 33%. Everyday bills like groceries, utilities and phone plans are not counted.
What DTI do lenders accept?
- 36% or less – comfortable for most lenders and most budgets.
- Up to about 43–45% – common for conventional loans; Fannie Mae can go up to 50% with automated approval and strong credit.
- FHA and VA – can approve higher ratios with compensating factors such as savings or a strong credit history.
Frequently asked questions
How can I lower my debt-to-income ratio?
Pay down balances (especially small loans you can finish soon), avoid new debt before applying, add a co-borrower's income, or choose a less expensive home to lower the housing payment.
Does DTI affect my credit score?
No. Credit scores do not use your income, so DTI is not part of the score. Lenders calculate it separately when you apply.
Is rent included in debt-to-income ratio?
When you apply for a mortgage, the lender uses the new house payment instead of your current rent. For other loans, lenders may count your rent as a housing payment.