What is a Good Debt-to-Income Ratio for a Mortgage?

What is a Good Debt-to-Income Ratio for a Mortgage?

Your Debt-to-Income (DTI) ratio is one of the most important numbers lenders look at when evaluating your mortgage application. It measures the percentage of your gross monthly income that goes toward paying debts.

Calculating Your DTI

DTI = (Total Monthly Debt Payments / Gross Monthly Income) * 100

Debts include:

• Rent/Mortgage
• Student loans
• Auto loans
• Credit card minimum payments
• Personal loans

Ideal DTI Ratios

• 36% or less: Considered excellent. Most lenders will offer you their best rates.
• 36% - 43%: Considered good. You should still qualify for most loans.
• 43% - 50%: Acceptable for some lenders (especially FHA loans), but you may face higher interest rates or stricter requirements.
• Above 50%: Difficult to qualify for a standard mortgage. You may need to pay down debt or increase income first.

Improving Your DTI

1. Pay down debt: Focus on high-interest credit cards or small loans to eliminate monthly payments.
2. Increase income: Taking on a side gig or getting a raise increases the denominator in the DTI equation.
3. Avoid new debt: Don't finance a car or furniture before applying for a mortgage.

Knowing your DTI helps you understand your borrowing power. Use our Mortgage Calculator to see how different loan amounts affect your monthly payment and DTI.