What Is a Good Debt-to-Income Ratio?
What is a debt-to-income (DTI) ratio?
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward paying debts. It is calculated by dividing your total monthly debt payments by your gross monthly income and multiplying by 100.
DTI is one of the most important numbers lenders use to decide whether to approve a loan — and how much to lend. A lower DTI signals that you have a manageable debt load relative to your income.
How to calculate your DTI ratio
Lenders look at two versions: front-end DTI and back-end DTI.
Front-end DTI (housing ratio) = Monthly housing costs ÷ Gross monthly income × 100. Housing costs include mortgage principal and interest, property tax, home insurance, and HOA fees. Most lenders want this below 28%.
Back-end DTI (total debt ratio) = All monthly debt payments ÷ Gross monthly income × 100. This includes housing costs plus car loans, student loans, minimum credit card payments, child support, and personal loans. Most conventional lenders want this below 43%.
Example: If your gross monthly income is $6,000 and your total monthly debts are $1,800, your back-end DTI is 30% — well within the acceptable range.
What is a good DTI ratio?
Below 20%: Excellent — you have significant borrowing capacity and will qualify for the best rates.
20–35%: Good — manageable debt load, strong borrowing position.
36–43%: Caution zone — you may still qualify for loans but should avoid adding more debt.
Above 43%: High risk — most conventional lenders will decline. Government-backed loans (FHA) may allow up to 50% in some cases, but lender approval at this level does not mean the debt is affordable.
Why lender approval does not equal affordability
This is the most important thing most DTI guides don't tell you: DTI is calculated on your gross (pre-tax) income, but you live on your net (after-tax) income. A 43% DTI on $6,000 gross monthly income means $2,580/month in debt payments. After income taxes, healthcare, and retirement contributions, your actual take-home might be $4,200 — meaning your real debt burden is over 60% of what you actually receive.
Being approved for a loan at 43% DTI is not the same as being able to comfortably afford it. Build in a personal buffer well below the lender's maximum, especially if your income is variable or you have irregular expenses.
Which debts count toward DTI?
Included: Mortgage or rent, car loans, student loans, minimum credit card payments, personal loans, child support, alimony, boat loans, and any other instalment or revolving debt.
Not included: Utilities, groceries, subscriptions, insurance (except homeowner/renter insurance for the housing ratio), phone bills, or discretionary spending.
Calculate your DTI ratio
Use CalculatePilot's free DTI calculator to calculate both your front-end and back-end ratio in seconds. No signup required.