Your debt-to-income ratio — DTI — compares how much you pay toward debt each month to how much you earn. Lenders use it, alongside your credit, to judge whether you can comfortably take on a new loan.
How DTI is calculated: add up your total monthly debt payments and divide by your gross monthly income (income before taxes). The result, as a percentage, is your DTI.
What counts as monthly debt: rent or mortgage payments, auto loans, student loans, minimum credit card payments, personal loans, and similar obligations. Everyday costs like utilities and groceries are generally not included.
Two versions lenders look at:
- Front-end DTI — housing costs only, as a share of income.
- Back-end DTI — all monthly debt, including housing. This is the one most often quoted.
What is a good DTI? Lower is better. Many lenders look for a back-end DTI at or below about 43%, and a lower ratio can help you qualify for better terms. Requirements vary by loan type and lender.
How to improve your DTI:
- Pay down existing balances, especially high-payment debts.
- Avoid taking on new debt shortly before you apply.
- Increase your income where you can.
DTI works together with your credit score in a lending decision. To see where you stand, you can apply for an RMO personal loan or speak with an RMO representative.