Debt-to-Income Ratio and the 28/36 Rule: How Lenders Judge Your Budget
October 21, 2026
Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income. Lenders often look at two versions: the front-end ratio (housing costs only) and the back-end ratio (all debt payments). The classic 28/36 guideline says housing should not exceed 28% of gross income and total debt should not exceed 36%. On $6,000 a month, that is $1,680 for housing and $2,160 for all debt.
Skip the math and get your answer instantly:
Open the Mortgage Calculator →Calculating Your DTI
Add up your monthly debt obligations: mortgage or rent, property taxes and insurance, car loans, student loans, minimum credit card payments, and other loans. Divide by gross monthly income and multiply by 100.
Example: $1,500 housing + $350 car loan + $200 student loan + $100 credit card minimums = $2,150. On $6,000 gross income, the back-end DTI is 2,150 ÷ 6,000 = 35.8%. The front-end ratio is 1,500 ÷ 6,000 = 25%.
| Ratio | What it includes | Guideline | On $6,000 income |
|---|---|---|---|
| Front-end | Housing costs only | 28% or less | $1,680 |
| Back-end | All monthly debt | 36% or less | $2,160 |
How Lenders Use It
Conventional lenders often accept back-end ratios up to 43% to 45%, and some programs go higher with compensating factors such as strong credit, large reserves, or a big down payment. A lower DTI generally means a better rate and easier approval.
Rent, utilities, groceries, and insurance premiums other than escrowed ones are typically not counted in DTI, so it understates your total living costs. Use it as a lender's lens, not a full budget.
Improving Your Ratio
There are two levers: lower debt payments or raise income. Paying off a small loan with a high monthly payment can reduce DTI more than paying down a large mortgage-like balance with a small monthly payment. Avoid opening new credit lines before applying for a mortgage.
A larger down payment reduces the loan size and therefore the housing payment, which improves both ratios.
Frequently Asked Questions
What is a good debt-to-income ratio?
Under 36% is generally considered healthy, and many lenders allow up to about 43%.
Is DTI calculated on gross or net income?
Gross income, before taxes.
Are utilities included in DTI?
No. Typical DTI includes debt payments, not living expenses such as utilities and groceries.
How can I lower my DTI quickly?
Pay off small loans or credit cards with high payments, avoid new debt, and consider adding income.