What Is Debt-to-Income Ratio (DTI) and Why It Matters

Debt-to-income (DTI) is the percentage of your gross monthly income that goes to required debt payments. It's the single most important number lenders look at — more than credit score, in many cases.

How to calculate

Add minimum monthly debt payments (housing, car, student loans, credit card minimums, child support). Divide by gross monthly income (before taxes). Multiply by 100.

Example: $1,800 in debt payments ÷ $6,000 gross income = 30% DTI.

What lenders want

• Conventional mortgage: 43% maximum, 36% preferred
• FHA loan: Up to 50% with compensating factors
• Auto loan: Under 45% typically
• Personal loan: Under 40% typically

How to lower it fast

Two levers: reduce debt payments or raise income. Quick wins: pay off a small loan entirely (eliminates the payment, not just shrinks it); refinance auto loan to lower the monthly; remove an authorized-user account from someone else's card that's affecting your minimums.

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DebtFreely provides general educational information about debt payoff strategies. It is not financial, legal, or tax advice. Consult a qualified professional for advice specific to your situation.