Frequently Asked Questions
What is a good debt-to-income ratio?
A DTI under 20% is excellent. 20-35% is good and manageable. 36-43% is acceptable for most lenders. Above 43% is considered high and may make it difficult to qualify for new loans, especially mortgages.
What debts are included in DTI?
DTI includes all recurring monthly debt payments: mortgage/rent, car loans, student loans, credit card minimums, personal loans, child support, and alimony. It does not include utilities, groceries, insurance premiums, or taxes.
Does DTI affect my credit score?
No, DTI is not a factor in credit score calculations. However, lenders consider both your credit score AND your DTI when making lending decisions. A high DTI can prevent loan approval even with excellent credit.
How can I lower my DTI?
You can lower DTI by paying down debts, increasing income, avoiding new debt, or refinancing existing debts to lower monthly payments. Paying off small debts like credit cards can quickly reduce DTI.
What DTI do I need for a mortgage?
Most conventional mortgages require a back-end DTI of 43% or less. FHA loans may allow up to 50% with compensating factors. VA loans have more flexibility. The lower your DTI, the better your chances of approval and terms.