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What Is a Good Debt-to-Income Ratio?
Your debt-to-income ratio (DTI) is one of the most important numbers lenders look at — and a useful gauge of your own financial health. It compares how much you owe each month to how much you earn. Here's how to calculate it, what counts as healthy, and how to improve it.
→ Lower the debt side of your ratio with a payoff planHow to calculate your DTI
Add up your monthly debt payments (rent or mortgage, car loan, minimum credit card payments, student loans, personal loans) and divide by your gross monthly income (before taxes). Multiply by 100 for a percentage.
What counts as a good DTI?
| DTI | How lenders see it |
|---|---|
| Under 36% | Healthy — strong borrowing position |
| 36%–43% | Manageable, but watch it |
| Over 43% | Risky — harder to qualify for loans |
Many mortgage lenders cap DTI around 43%, so lowering yours can be the difference between approval and rejection — and between a good rate and a bad one.
→ See how paying down debt cuts your monthly obligationsHow to lower your DTI
- Pay down debt balances. Fewer or smaller debts means lower monthly payments and a lower ratio. Targeting high-payment debts helps the ratio fastest.
- Avoid taking on new debt. A new car loan right before a mortgage application can push your DTI over the line.
- Increase your income. A raise or side income raises the denominator and lowers the ratio.
- Refinance or consolidate to a lower monthly payment — but only if the overall cost makes sense.
Why it matters beyond loans
Even if you're not borrowing, DTI is a quick health check. A high ratio means too much of your income is committed before you spend a dollar on living or saving. Bringing it down frees up cash flow and reduces financial stress.
The bottom line
DTI is your monthly debt payments divided by gross income. Under 36% is the goal. The most reliable way to improve it is the same thing that improves everything else — steadily paying down what you owe.
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