Finance📅 12 March 2025⏱ 6 min read
How to Calculate Your Debt-to-Income Ratio
DTI is the number lenders check first. Here's what it means, how to calculate it, and what ratio gets you approved.
JW
James WhitfieldPersonal Finance & Maths WriterJames has written about personal finance, health metrics, and everyday mathematics for over six years. He holds a BSc in Mathematics from the University of Leeds.
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward debt payments. It's one of the most important numbers a mortgage lender, bank, or credit provider will check — and one of the most actionable levers you have for improving your financial options.
The Formula
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
Step 1: Add all monthly debt obligations: mortgage/rent, car loans, student loans, credit card minimums, personal loans, any other recurring debt.
Step 2: Get your gross monthly income (before tax).
Step 3: Divide and multiply by 100. Example: £1,200 debt ÷ £4,000 income = 30% DTI.
What's a Good DTI?
DTI RangeLender View
Below 20%✓ Excellent
20–35%✓ Good
36–43%Acceptable
44–50%High — limited options
Above 50%Very high — likely declined
Mortgage Thresholds You Need to Know
- 43% — the general maximum for a qualified mortgage (the "43% rule")
- 36% — the gold standard preferred by conventional lenders
- 28% — ideal front-end DTI (housing costs only)
- FHA loans may allow up to 57% with compensating factors (high credit score, large down payment)
Front-End vs. Back-End DTI
- Front-end DTI: Housing costs only. Target: below 28%.
- Back-end DTI: All debt. This is what most people mean by "DTI." Target: below 36%.
How to Lower Your DTI
There are only two levers: reduce debt or increase income.
- Pay off smaller debts first (snowball method) to quickly reduce the number of monthly payments
- Avoid taking on new debt before a major credit application
- Consolidate high-payment debts into a single lower-payment loan
- Add income sources — a second earner on a mortgage application can dramatically change your ratio