How to calculate debt to income ratio, step by step with examples

The short answer: to calculate debt to income ratio, divide your monthly debt payments by your gross monthly income and multiply by 100. Lenders use it to decide how much they'll lend.

• Example: $2,150 in payments on $5,000 gross income is 43%
• Under about 36%: most lenders see this as comfortable
• About 36% to 43%: many loans are still possible, with less room for surprises
• Over 43%: a common upper limit for many mortgages, though some lenders go higher
• Next step: Plan it with the Debt Payoff Planner ($6.99).

Knowing how to calculate debt to income ratio tells you how much of your income already goes to debt before you pay for anything else. Lenders use it to decide how much they'll lend. You can use it to see how much breathing room your budget has. This guide gives you the formula, what to include, worked examples and ways to lower your number.

The formula

Debt to income ratio, or DTI, is simple:

Monthly debt payments ÷ gross monthly income × 100 = DTI (%)

The CFPB's debt-to-income ratio explainer uses the same formula and explains how lenders read the result.

Step 1: Add up monthly debt payments

Include payments you must make every month:

Not sure what counts? Our guide to what is debt lists the main types, from mortgages to buy now, pay later plans.

• Rent, or a mortgage payment with property taxes, insurance and HOA dues
• Car loans and leases
• Student loans (the required payment, even if it's in deferment for some lenders)
• Minimum credit card payments
• Personal loans and buy now pay later plans
• Child support or alimony you pay

Leave out everyday costs like groceries, utilities, phone, gas, health insurance premiums and subscriptions. They matter for your budget, but lenders don't count them in DTI.

Step 2: Find your gross monthly income

Use income before taxes and deductions:

If your pay varies or you have more than one income, our guide to gross monthly income has formulas for every pay type and a salary-to-monthly table.

1. Salary: divide your yearly salary by 12.
2. Hourly: hourly rate × usual weekly hours × 52 ÷ 12.
3. Self-employed: lenders often average net business income from your last two tax returns.
4. Other steady income: add Social Security, pensions, disability and support you receive.

If your pay changes a lot, our guide to how to budget with irregular income shows how to find a fair monthly figure.

Step 3: Divide and multiply by 100

Here's a worked example for one household:

$2,150 ÷ $5,000 = 0.43. Multiply by 100 and the DTI is 43%.

Housing alone is $1,500 ÷ $5,000 = 30%. That's the front-end ratio.

Front-end vs. back-end DTI

• Front-end DTI counts only housing: rent or mortgage, property taxes, insurance and HOA dues.
• Back-end DTI counts housing plus every other debt payment.

Mortgage lenders look at both. When someone says "DTI" without saying which, they usually mean back-end. To turn those limits into a price, see how much house you can afford on your salary.

What the number means

There's no single cutoff that applies to every lender or loan. As general guides:

• Under about 36%: most lenders see this as comfortable, and so will your budget.
• About 36% to 43%: many loans are still possible, but there's less room for surprises.
• Over 43%: the CFPB notes 43% has long been a common upper limit for many mortgages, though some lenders go higher.

If you're thinking about buying a home, the CFPB's buying a house tools walk through how DTI fits with your down payment and loan options. Renters can use our how much rent can I afford guide.

How to lower your debt to income ratio

Paying down debt while you also plan how to save for a house improves your ratio and your savings at the same time.

1. Pay off a small debt completely. Removing a $150 monthly payment drops DTI more than spreading the same money across several balances.
2. Pay down card balances. Lower balances often mean lower minimum payments.
3. Avoid new loans in the months before you apply for a mortgage or car loan.
4. Refinance to a lower payment if it doesn't add big fees or years. Our mortgage refinance guide covers when a lower rate or cash-out makes sense.
5. Raise income with a documented raise, more hours or steady side work.

The snowball method, which targets the smallest balance first, often lowers DTI fastest because it wipes out whole payments. Read debt snowball vs. avalanche to compare methods. For more on this topic, see our financial calculators hub.

A second example: a lower ratio

Say a single parent earns $4,200 a month before taxes. Rent is $1,100, a car loan is $280 and credit card minimums total $60. Debt payments add up to $1,440.

$1,440 ÷ $4,200 = 0.343, or about 34%. The front-end ratio is $1,100 ÷ $4,200, or about 26%.

If the car loan is paid off next year, the total drops to $1,160 and the ratio falls to about 28%. That one change frees $280 a month for savings or other goals. It also shows why paying off a whole loan matters so much for DTI.

DTI for a joint application

When two people apply together, lenders add both incomes and both sets of debt payments. A partner with high student loan payments can raise the joint ratio even if their income is good. Run the numbers for each person and together before you apply, so there are no surprises.

Common mistakes

• Using take-home pay instead of gross income, which makes DTI look worse than lenders see it.
• Using full card balances instead of minimum payments.
• Forgetting buy now pay later plans or a co-signed loan.
• Counting one-time income like a tax refund.

Track it once a year

Recalculate your DTI every January or after a big change, like a raise or a paid-off loan. Watching it fall is a clear sign your plan is working.

Your ratio shows how much of your income goes to debt. For the bigger picture, learn how to calculate net worth: what you own minus what you owe.

The Debt Payoff Planner ($6.99) tracks up to 10 debts, switches between snowball and avalanche, and shows a month-by-month schedule, each debt's payoff month, your debt-free date and interest saved. The Paycheck Budget Spreadsheet ($5.99) assigns each bill to the right paycheck so you can see what's left to spend.

Next steps: how to get out of debt, the debt tracker and how to build credit.

Before you apply for a loan, it also helps to check your credit report for free and fix any errors. Lenders look at your score too; our guide to credit score ranges shows where yours stands.