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

Lenders draw a hard line at 43% DTI. Under 36% is comfortable. Under 28% gets you the best rate. Here's how to land on the right side of each line.

The Magic Number: 36%

When you apply for a mortgage in the U.S., the lender pulls your credit report, verifies your income, and calculates your debt-to-income ratio (DTI). They divide your total monthly debt payments by your gross monthly income, multiply by 100, and use that number to decide whether to approve you, what rate to offer, and how much house you can afford.

The short answer: a back-end DTI under 36% is "good" and unlocks competitive rates. Under 28% is excellent. Over 43% triggers warnings, and over 50% will get most applications declined.

Front-End vs Back-End DTI

Lenders actually look at two ratios:

Front-end DTI (housing-only)

(Mortgage payment + property tax + insurance + HOA) 梅 gross monthly income. Target: under 28%. This tells the lender how much of your income housing alone will consume.

Back-end DTI (all debt)

(Housing + car loan + student loans + credit card minimums + alimony) 梅 gross monthly income. Target: under 36%. This is what most articles mean by "DTI."

Both matter. A 28% front-end with a 45% back-end raises red flags 鈥?you might afford the house but your other obligations leave no margin for emergencies. Use our DTI Calculator to compute your back-end ratio in 10 seconds.

Loan Type DTI Limits

"Compensating factors" means you have offsets like: credit score above 740, 25%+ down payment, six months of cash reserves, or stable long-tenure employment. Each compensating factor can stretch the DTI limit by 1鈥? percentage points.

A Worked Example

Sarah earns $7,500/month gross. She has:

• $450 car payment
• $200 student loan
• $95 credit card minimums
• Considering a $2,200/month mortgage payment (PITI)

Front-end DTI: $2,200 梅 $7,500 = 29.3% (slightly over 28% target, but acceptable)

Back-end DTI: ($2,200 + $450 + $200 + $95) 梅 $7,500 = 39.3% (over 36%, into "warning")

Sarah will likely get approved at conventional or FHA 鈥?but probably not at the best rate. To get into "good" territory, she'd need to pay off the car ($450/month) or move to a cheaper mortgage payment.

How to Improve Your DTI Before Applying

You have roughly 3鈥? months to improve DTI before a mortgage application. The fastest moves:

1. Pay off a small debt entirely. Eliminating a $150 minimum payment drops your monthly debt by $150 鈥?and lenders only count "minimum payments," so paying down a credit card from $5,000 to $4,000 won't help as much as paying off a $1,500 store card to zero.
2. Increase documented income. If you have a side hustle, get it on paper. Two years of tax returns showing the income makes it count toward "gross income."
3. Don't open new credit. A new car loan in the 60 days before applying can push you out of qualification entirely.
4. Pay off the auto loan. If you have fewer than 10 payments left, some lenders allow you to exclude it from DTI. Paying ahead can flip a borderline file.
5. Avoid student loan re-amortization. If your student loans are in income-driven repayment, lenders may use 0.5鈥?% of the balance as the "minimum" even if your actual payment is lower. Switching plans temporarily can help.

U.K. and Australia: Different Names, Same Idea

In the U.K., lenders use an "affordability assessment" that includes DTI but also caps loan-to-income at 4.5脳 (4.5 times annual gross income). Australian lenders similarly use a serviceability calculation. The 36% benchmark roughly translates across all three markets, though specific products and caps vary.

The Bottom Line

Aim for a back-end DTI under 36% before applying for a mortgage 鈥?and under 28% if you want the best rate tier. If you're above 43%, focus on aggressive debt payoff for 6鈥?2 months before applying. Use our free DTI Calculator to check where you stand, and our Debt Payoff Calculator to plan how to improve it.

Frequently Asked Questions