Debt-to-income ratio: the number lenders check before your score
The 28/36 guideline, what counts, and the fastest way to move the ratio.
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Before a lender looks at your credit score, it checks whether the payment fits your income. That is your debt-to-income ratio: monthly debt payments divided by gross monthly income. It is the quietest reason good applications get declined.
The 28/36 guideline
A long-standing underwriting convention, particularly in mortgage lending:
- 28% of gross monthly income toward housing.
- 36% toward all debt payments combined.
On $6,000 a month gross, that is $1,680 for housing and $2,160 for total debt, leaving $480 of room for car payments, student loans, and card minimums combined.
28/36 is a guideline, not a law. Plenty of loans are written above it, and some programs allow considerably higher ratios. Treat it as the level above which questions start.
What counts, and what does not
| Counted in DTI | Usually not counted |
|---|---|
| Mortgage or rent | Utilities |
| Car loans and leases | Groceries and fuel |
| Student loans | Insurance premiums (unless escrowed) |
| Credit card minimum payments | Subscriptions |
| Personal loans | Taxes withheld from pay |
Note that credit cards count at the minimum payment, not the balance. This is why a large balance with a small minimum can hurt your score through utilization while barely moving DTI.
The two ways to improve it
DTI is a ratio, so there are only two levers: lower the numerator or raise the denominator.
- Clear a small loan entirely. Eliminating a $300 monthly payment does more for DTI than paying $3,000 off a mortgage. Whole payments removed are what count.
- Avoid new debt before applying. A car bought two months before a mortgage application can change what you qualify for.
- Document all income. Bonus, freelance, and side income often counts if you can evidence it consistently.
To see what a given payment does to your ratio, run it through our loan calculator.
Front-end and back-end, which is what the two numbers mean
Lenders often quote two ratios, and the terms appear on paperwork without explanation:
- Front-end ratio: housing costs divided by gross income. For a mortgage this includes principal, interest, property tax, and insurance, not just the loan payment.
- Back-end ratio: all monthly debt payments including housing, divided by gross income. This is the one usually meant by "DTI".
The front-end figure catches people out, because a mortgage quote showing principal and interest can be a few hundred dollars below the actual monthly housing cost once tax and insurance are escrowed.
A worked case
Gross income $6,000 a month. Car payment $450, student loan $280, credit card minimums $70. That is $800 of non-housing debt before any mortgage.
| Measure | Amount | As % of $6,000 |
|---|---|---|
| Existing non-housing debt | $800 | 13.3% |
| Back-end cap at 36% | $2,160 | 36% |
| Left for housing | $1,360 | 22.7% |
| Front-end cap at 28% | $1,680 | 28% |
The binding constraint here is the back-end ratio, not the housing one. Existing debt has reduced the housing budget from $1,680 to $1,360, a difference of $320 a month. That is what a car payment costs you in housing capacity, and it is usually a larger number than people expect.
Clearing the $450 car payment would raise the housing allowance to the full $1,680. Removing a whole payment is what moves DTI, which is why paying off a small loan entirely beats making extra payments across several.
How lenders treat specific debts
| Debt | Usually counted as |
|---|---|
| Credit card | The minimum payment shown on the report, not the balance |
| Student loan in deferment | Often a calculated payment rather than zero, which surprises borrowers |
| Car lease | The full payment, even with few months remaining |
| Loan with under about ten months left | Sometimes excluded, depending on the program |
| Co-signed loan | Generally counted against you, even if someone else pays it |
The co-signed row causes real problems. Co-signing makes the debt yours for underwriting purposes regardless of who actually pays, and it can materially reduce what you qualify for years later.
Improving the ratio before applying
- Retire whole payments rather than reducing several balances. One cleared loan removes its entire payment from the calculation.
- Do not take on new debt in the months before applying, and especially not between approval and closing.
- Document all income. Consistent bonus, overtime, or self-employment income often counts with the right paperwork.
- Consider the term. A longer term lowers the monthly payment and therefore the ratio, at the cost of more total interest. See what that trade costs.
Frequently asked questions
Is DTI based on gross or net income?
Gross, before tax. This surprises people, because it makes the ratio look more comfortable than the money actually feels.
What DTI do I need?
It varies by lender and loan type. Below 36% is comfortable, and many programs go higher with compensating factors like a strong score or a large deposit.
Does my credit card balance count or just the minimum?
Generally the minimum payment. The balance affects your score separately.
Does paying off a card help DTI?
Only by removing the minimum payment, which is usually small. Its bigger benefit is to your credit score.
Does my spouse debt count if we apply together?
If you apply jointly, both incomes and both debts are included. Applying alone uses your income and debts, though community property rules vary by state.
Is rent included in DTI?
Current rent is generally not counted when qualifying for a mortgage, because it is being replaced by the new housing payment. It is often considered for other loan types.
What if my income varies month to month?
Lenders typically average it over a period, often two years for self-employment. Consistency and documentation matter more than any single strong month.
Can I qualify above 36%?
Frequently. Many programs allow higher ratios with compensating factors such as a strong credit score, significant reserves, or a large deposit. 28/36 is a guideline, not a ceiling.
Written by
Teja PagidimarriTeja Pagidimarri built 43dots to answer money questions with numbers you can check. He is a software developer, not a licensed financial advisor, so every guide here is built the way an engineer would: figures pulled from the primary source, math shown in the open, and the calculators built from the actual published formulas.
Every figure on this page was checked against the primary source linked beside it. Drafting is AI-assisted; the research, the numbers, and the final edit are mine. See our editorial policy and corrections. This is general information, not personalized financial advice.
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