Your debt-to-income ratio, or DTI, is one of the first numbers a mortgage lender looks at. It answers a simple question: of the money you earn each month, how much is already promised to debt repayments? A high ratio tells a lender there is little room left if something goes wrong.
This guide explains the two versions of DTI, what goes into each, the limits lenders commonly use, how the idea works outside the US, and the most effective ways to bring your ratio down. You can calculate your own in seconds with the debt-to-income calculator.
What debt-to-income ratio means
DTI compares your regular debt payments with your gross income, meaning income before tax and other deductions. Lenders use gross income because it is easier to verify and compare than take-home pay, which varies with tax rates, retirement contributions and benefits.
That choice has an important side effect: a DTI that looks acceptable on paper can feel much tighter in real life, because your actual budget runs on net income. Keep that in mind when you read the limits below.
Front-end vs back-end DTI
US lenders usually calculate two ratios.
Front-end DTI = monthly housing costs ÷ gross monthly income × 100Housing costs are the new mortgage's principal and interest, property tax, homeowners insurance, mortgage insurance and any HOA dues.
Back-end DTI = (housing costs + all other monthly debt payments) ÷ gross monthly income × 100Other debts include car loans, student loans, minimum credit card payments, personal loans and court-ordered payments.
The front-end ratio, sometimes called the housing ratio, shows whether the home itself is affordable. The back-end ratio shows whether you can carry the home on top of everything else you owe. When people say “DTI” without qualification, they usually mean the back-end figure, and it tends to matter more in approval decisions.
What counts, and what doesn’t
| Usually counted | Usually not counted |
|---|---|
| Mortgage principal and interest (new and any existing) | Utilities, phone and internet |
| Property tax and homeowners insurance | Groceries, transport and fuel |
| Mortgage insurance and HOA or strata fees | Health, car and life insurance |
| Car loans and leases | Subscriptions and memberships |
| Student loans, including some deferred loans | Childcare and school fees |
| Minimum payments on credit cards | Income tax and retirement contributions |
| Personal loans and lines of credit | Money you choose to save |
| Child support and alimony you pay | |
| Loans you have co-signed, in many cases |
A few details catch people out. Lenders use the minimum payment on your credit card statement, not what you actually pay. Student loans in deferment may still be counted using a calculated payment based on the balance. And income from overtime, bonuses, self-employment or rental property is often averaged over a period such as two years, or counted only in part, so your qualifying income may be lower than you expect.
Common DTI limits
There is no single universal cut-off. Each loan program and lender sets its own rules, and automated underwriting systems weigh DTI alongside your credit score, deposit and savings. These are the reference points you will hear most often in the US:
| Reference point | What it means |
|---|---|
| 28/36 rule | A traditional guideline: housing costs up to 28% of gross income, and all debts up to 36% |
| 43% | The back-end limit in the original Qualified Mortgage (QM) rule; the general QM definition has since moved to a pricing test, but 43% is still widely used as a reference point |
| Around 50% | The upper end some programs allow for strong applicants with compensating factors, such as a large deposit, cash reserves or excellent credit |
The 28/36 rule is best thought of as a comfort zone rather than a lending limit. Many borrowers are approved above it. Whether you should borrow that much is a separate question, and the affordability calculator shows how the price range changes as you move between these levels.
Approved is not the same as affordable. A lender's maximum tells you what they will lend, not what will leave room for savings, emergencies and the rest of your life. Plan your budget from take-home pay.
How lenders outside the US measure it
Australia. Lenders run a full serviceability assessment rather than relying on a single ratio. They start with your income after tax, subtract your living expenses (often the higher of your declared spending and a benchmark figure), then check whether you could still meet all your repayments if interest rates rose. The banking regulator, APRA, expects lenders to test repayments at a buffer above the actual loan rate, currently 3 percentage points. Lenders usually count your full credit card limit, not just the balance.
Australian lenders also use a different kind of DTI: total debt divided by gross annual income, a multiple rather than a percentage. APRA treats a ratio of six times income or more as high. Since 1 February 2026, banks can write no more than 20% of their new mortgage lending at that level, so loans above six times income are still possible but rationed. Lenders also test that you could afford repayments at a rate 3 percentage points above the actual rate (the serviceability buffer).
United Kingdom. Lenders typically look at loan-to-income multiples, commonly up to around 4.5 times income and higher for some borrowers, and the Bank of England limits the share of new mortgages lent at 4.5 times income or more. They also run an affordability assessment that includes your committed spending and a stress test.
Canada. Lenders use the gross debt service (GDS) and total debt service (TDS) ratios. GDS includes mortgage payments, property tax, heating and half of any condo fees; TDS adds your other debts. Commonly cited maximums for insured mortgages are 39% GDS and 44% TDS. Borrowers must also pass a stress test at a qualifying rate above their contract rate.
Thresholds, buffers and caps in every country can change, so check current rules with a lender or broker.
Worked examples
Worked example: a US buyer
Gross income is $90,000 a year, or $7,500 a month.
Proposed housing costs: principal and interest $1,800, property tax $350, homeowners insurance $120. Total $2,270.
Other debts: car loan $450, student loan $300, credit card minimums $120. Total $870.
Front-end DTI = $2,270 ÷ $7,500 = 30.3%
Back-end DTI = ($2,270 + $870) ÷ $7,500 = $3,140 ÷ $7,500 = 41.9%
This buyer is over the 28/36 guideline on both measures but under the 43% reference point. Many lenders could still approve the loan, but it is a stretch. To reach 36% back-end, total monthly debts would need to fall to $2,700, a cut of $440. The options:
- Pay off the car loan. Clearing it removes $450 a month and brings back-end DTI to 35.9%.
- Pay off the credit cards. That removes only $120, leaving DTI at 40.3%.
- Choose a cheaper home. With the existing debts, housing costs would need to be $1,830 or less to hit 36%.
- Earn more. The same debts would be 36% of a gross income of about $104,700 a year.
Worked example: an Australian buyer
Gross income is $120,000. The buyer wants a $650,000 home loan, has a $25,000 car loan and a $15,000 credit card limit. Total debt is $690,000, a DTI of 5.75.
If the loan were $700,000 instead, total debt would be $740,000 and DTI would rise to 6.17, into high-DTI territory. Closing the card and clearing the car loan would bring it back to 5.83.
The serviceability buffer matters too. At an assumed 6%, repayments on $650,000 over 30 years are $3,897 a month. Tested at 9%, they are $5,230, and the lender needs to see that the higher figure fits within the buyer's budget.
How to lower your DTI
- Target payments, not just balances. For DTI purposes, the best debt to clear is the one with the biggest monthly payment relative to its balance, such as a car loan with a few months left. That differs from the interest-first or smallest-first approaches compared in our guide to the debt snowball vs avalanche. If you are applying soon, a DTI-first order can make sense; otherwise, the interest saved by the avalanche usually wins. The debt payoff planner shows both.
- Avoid new debt before you apply. A new car loan or store card a few months before a mortgage application can push you over a limit.
- Reduce unused credit limits. This matters most in Australia, where limits count as debt. In the US, closing old cards can affect your credit utilization and score, so think it through.
- Increase your documented income. A raise, a co-borrower or regular secondary income can help, but lenders usually want a track record, so plan ahead.
- Borrow less. A larger deposit or a lower price reduces the housing payment directly. Our guide to how much deposit you need covers the trade-offs.
- Be careful with stretching terms. Refinancing a debt over a longer term lowers the payment and the ratio, but usually increases the total interest you pay.
DTI is not the whole picture
Lenders combine DTI with your credit history, deposit size, savings, job stability and the property itself. A strong file can offset a higher ratio, and a weak one can sink an application with a low ratio.
For your own planning, use DTI as a warning light rather than a target. Build a budget from your take-home pay, include the costs DTI ignores, such as childcare, utilities and maintenance, and leave room for savings. Run the repayment through the mortgage calculator at a higher rate as well as the one you are quoted, and you will have a much better sense of what you can carry than any single ratio can give you.
This guide is general information, not personal financial advice. Rules and products vary by country and lender.