Lenders look at your debt-to-income ratio (DTI) when you apply for a mortgage, car loan or personal loan. It's also a useful check on your own budget.
How it's calculated
DTI = total monthly debt payments ÷ gross monthly income.
Example: $5,000 gross a month. Payments: $1,400 housing, $350 car, $200 student loan, $150 credit cards = $2,100. DTI = 42%.
What lenders look at
Many lenders look for a total DTI around 36% or lower, and some mortgage programs allow higher. Each lender sets its own limits, so treat these as rough guides.
Two ways to lower it
- Lower the payments. Paying off the smallest balance removes a whole payment. In the example, clearing the $150 card drops DTI to 39%.
- Raise the income. The same $2,100 on $5,500 gross is about 38%.
Watch the minimums
Minimum payments on cards go into DTI, so a card paid down (or paid off) helps twice: lower interest and a lower ratio.
Free tools
- Debt-to-income ratio calculator
- Debt consolidation calculator
- Free debt payoff spreadsheet (CSV for Excel / Google Sheets)
- Debt Snowball & Avalanche Payoff Planner (payoff date and interest saved for every balance)
- 42 free budget templates, pay what you want ($0 is fine)
General information, not personal financial advice.