Debt-to-Income Ratio (DTI): Formula, Limits and Mortgage Approval
Calculate your debt-to-income ratio, understand the 28/36 rule lenders use, and learn the fastest ways to lower DTI before applying.
DTI is your monthly debt payments divided by gross monthly income — most mortgage lenders want it under 43%, and under 36% gets you the best terms.
What you'll walk away with
Skim these first — then dig into the details below.
- 1DTI = monthly debt payments ÷ gross monthly income × 100.
- 2Mortgage lenders generally cap DTI at 43%; 36% or lower is ideal.
- 3Front-end DTI (housing costs only) should stay under about 28%.
- 4Eliminating a small loan entirely can raise your approval amount more than paying down a big one.
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Credit score gets the attention, but DTI is what caps the size of your loan. A great score with a 50% DTI still gets declined.
It is also one of the few approval factors you can change in weeks rather than months.
How to calculate your DTI
Use gross income — pre-tax — because that is what lenders use.
- 1
Add up your monthly debt payments: housing, auto, student loans, personal loans, and credit card minimums.
- 2
Include court-ordered payments like child support or alimony.
- 3
Exclude utilities, groceries, insurance, phone, and streaming — those are not debts.
- 4
Divide the total by your gross monthly income and multiply by 100.
The 28/36 rule
Lenders look at two ratios, and you have to clear both.
- Front-end (28%): housing costs alone — principal, interest, taxes, insurance, and HOA.
- Back-end (36%): all debt payments including housing.
- Many programs stretch the back-end to 43%, and some go higher with strong compensating factors.
- Just because a lender approves 43% does not mean the payment leaves room to live.
How to lower DTI before applying
The trick is that DTI counts payments, not balances. That changes which debts to attack.
- 1
Pay off small loans completely to remove their entire monthly payment.
- 2
Avoid opening any new loan or card in the 3–6 months before applying.
- 3
Do not finance furniture or a car right before a mortgage — it can shrink your approval by tens of thousands.
- 4
Document all qualifying income: bonuses, overtime, and side income with a two-year history.
- 5
Consider a smaller purchase price rather than stretching the ratio — see how much house can I afford.
Disclaimer: This page includes AI-assisted educational content reviewed for general accuracy. It is not personalized financial, tax, or legal advice. Verify numbers with a qualified professional and our editorial standards.
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