What is Debt-to-Income Ratio (DTI)?
Your Debt-to-Income (DTI) ratio is the percentage of your gross monthly income that goes toward paying debts. Lenders use it as a key metric to evaluate your ability to manage monthly payments and repay borrowed money.
DTI Thresholds Lenders Look For
- Below 36%: Excellent — most lenders will approve you easily.
- 36%–43%: Acceptable — some lenders may add conditions.
- 43%–50%: Risky — approval depends on other factors.
- Above 50%: High risk — most lenders will decline your application.
How to Improve Your DTI
The two levers are increasing income or reducing debt. Pay off small debts first (the debt snowball method), avoid new credit before applying for a mortgage, and consider refinancing high-interest debt to lower monthly payments.