How DTI is calculated
Back-end DTI = total monthly debt payments ÷ gross monthly income
Gross means before taxes. If you earn $8,000/month and your debt payments — housing, car, student loans, card minimums — total $2,880, your back-end DTI is 36%.
Why lenders care
DTI is the clearest signal of whether you can absorb a new payment. Two people with the same credit score and income can be very different risks if one has a car payment and student loans and the other doesn’t. Mortgage underwriting, auto lenders, and personal-loan lenders all gate approvals on it.
Common thresholds
| Back-end DTI | What it usually means |
|---|---|
| ≤ 36% | Comfortable; broadest loan options and best pricing |
| 36–43% | Still qualifies for most conforming mortgages |
| 43–50% | Limited to certain programs; expect scrutiny |
| > 50% | Very hard to get new credit; focus on paydown |
Lowering your DTI
- Pay off a small installment loan. Removing a $450 car payment can drop DTI several points instantly.
- Pay down revolving balances so the minimums shrink — use the snowball/avalanche calculator.
- Don’t open new accounts before a mortgage application.
- Increase documented income — a raise, a second job with history, or counting a bonus you can prove.
Planning to buy a home? Feed the result into the home affordability calculator.