What the numbers mean
Below 36% is generally considered healthy and opens the best rates. Between 36 and 43% is acceptable to most lenders. Above 43% starts to close doors, and above 50% makes approval difficult almost everywhere.
Lenders usually look at two ratios. The front-end ratio counts only housing costs, and is typically expected to stay under about 28%. The back-end ratio counts all debt, which is the headline figure here.
Improving your ratio
There are only two levers: reduce monthly debt payments or increase income. Clearing a small loan entirely often helps more than partially paying down a large one, because the ratio counts monthly payments rather than balances. Refinancing to a longer term also lowers the monthly figure, though it costs more in total interest.
Avoid taking any new credit in the months before a major loan application, since a new car loan can single-handedly push you over a threshold.
Frequently asked questions
Is it gross or net income?
Gross, meaning before tax and deductions. This is the convention lenders use in most markets.
What debts should I include?
All recurring debt payments: mortgage or rent, car loans, personal loans, student loans and minimum credit card payments. Exclude utilities, groceries, insurance and subscriptions.
What DTI do I need for a mortgage?
Most lenders prefer under 43%, with the best terms typically going to applicants below 36%. Requirements vary by country, product and lender.
Does rent count?
Yes, your current housing cost counts. If you are applying for a mortgage, lenders use the proposed new housing payment rather than your current rent.
Why does clearing a small loan help so much?
The ratio measures monthly payments, not balances. Eliminating a payment entirely removes it from the numerator, which can move the ratio more than a partial paydown of a bigger debt.
Does a high DTI affect my credit score?
Not directly. Credit scores use credit utilisation, which compares balances to limits. DTI is a separate lender assessment, though the two often move together.