Before anyone looks at your credit score, they work out how much of your income is already promised to somebody else. You can calculate it yourself in a minute.
Two ratios, not one
Debt-to-income is your monthly debt payments divided by your gross monthly income. Lenders calculate it twice.
The front-end ratio is housing alone against income — can you afford the roof? The back-end ratio is every debt payment against income — can you afford everything? When someone says "your DTI", they nearly always mean the back-end number, and it is the one that decides applications.
What the thresholds actually mean
- 28% / 36% — the classic guideline. Housing under 28% of gross income, all debt under 36%. Comfortable, and you will not struggle to borrow.
- 36–43% — workable. Most mortgage programmes still lend, though possibly at a worse rate. Less slack in your month than the number suggests.
- 43% — a widely used ceiling for qualified mortgages in the US and a common limit elsewhere. Above it, options narrow quickly.
- Over 50% — more than half your gross income is committed before food. Most lenders decline, and they are right to.
These are conventions rather than laws. They vary by lender, country and loan type, and some programmes stretch further given a large deposit or substantial reserves.
The catch: it uses gross income
Lenders calculate DTI on pre-tax income. Which means a ratio that looks comfortable to them can feel nothing of the sort to you.
A 36% back-end ratio on gross income can easily be 45% or more of what actually lands in your account. The lender is not being dishonest — they are measuring credit risk, not your quality of life. Those are different questions, and only one of them is your problem.
What a lender calls affordable and what you would call affordable are not the same thing.
What counts and what does not
Counted: rent or mortgage including escrowed tax and insurance, car loans, student loans, credit card minimums, personal loans, court-ordered alimony or child support.
Not counted: utilities, phone, groceries, subscriptions, childcare, separately-paid insurance, and anything you put on a card and clear in full each month.
Which is why a healthy DTI does not automatically mean a healthy budget. Childcare alone can exceed a mortgage payment and appears nowhere in this calculation.
DTI counts payments, not balances. Paying off a 250-a-month car loan removes 250 from the numerator entirely. Putting the same money towards a mortgage removes nothing, because the payment stays exactly where it was. If you are preparing to apply for something, target the debt with the largest payment relative to its balance.
Do not do these before applying
Opening new credit, financing a large purchase, or moving a balance onto a longer term. All three raise the ratio at precisely the wrong moment, and lenders re-check shortly before completion — a car bought between approval and closing has cost people the house.
Where it sits alongside your credit score
They answer different questions. Your credit score describes how reliably you have repaid in the past. DTI describes whether you can afford to repay now. Lenders want both, and an excellent score will not rescue an application where the ratio does not work.
The good news is that DTI moves much faster than a credit score. Clear one payment and it improves the same month.