What is a debt-to-income ratio? | Consumer Financial Protection Bureau (2024)

About us

We're the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.

Learn how the CFPB can help you

Legal disclaimer

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The CFPB updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.

What is a debt-to-income ratio? | Consumer Financial Protection Bureau (2024)


What is a debt-to-income ratio? | Consumer Financial Protection Bureau? ›

Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.

What is the debt-to-income ratio for CFPB? ›

Consider maintaining a debt-to- income ratio for all debts of 36 percent or less. Some lenders will go up to 43 percent or higher. Your home mortgage is included in this ratio. Consider maintaining a debt-to- income ratio for all debts of 15-20 percent or less.

What is the consumer debt-to-income ratio? ›

Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it's the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt.

What is an acceptable debt-to-income ratio? ›

35% or less: Looking Good - Relative to your income, your debt is at a manageable level. You most likely have money left over for saving or spending after you've paid your bills. Lenders generally view a lower DTI as favorable.

What is the debt-to-income ratio for USDA loan? ›

USDA Loan Eligibility

A minimum credit score of around 620 (credit score requirements might vary per borrower) A debt-to-income (DTI) ratio of 41% or less.

Is a 7% debt-to-income ratio good? ›

DTI is one factor that can help lenders decide whether you can repay the money you have borrowed or take on more debt. A good debt-to-income ratio is below 43%, and many lenders prefer 36% or below. Learn more about how debt-to-income ratio is calculated and how you can improve yours.

What is a good debt-to-income ratio Ramsey? ›

Lenders often use the 28/36 rule as a sign of a healthy DTI—meaning you won't spend more than 28% of your gross monthly income on mortgage payments and no more than 36% of your income on total debt payments (including a mortgage, student loans, car loans and credit card debt).

Is a 10% debt-to-income ratio good? ›

35% or less is generally viewed as favorable, and your debt is manageable. You likely have money remaining after paying monthly bills. 36% to 49% means your DTI ratio is adequate, but you have room for improvement. Lenders might ask for other eligibility requirements.

Is a 20 debt-to-income ratio good? ›

Generally, a DTI of 20% or less is considered low and at or below 43% is the rule of thumb for getting a qualified mortgage, according to the CFPB. Lenders for personal loans tend to be more lenient with DTI than mortgage lenders. In all cases, however, the lower your DTI, the better.

Is 11% debt-to-income ratio good? ›

11% to 20%: Again, shouldn't have trouble getting loans. Time to scale back on spending. 21% to 35%: Although you may not have trouble getting new credit cards, you are spending too much of your monthly income on debt repayment. 36% to 50%: You may still qualify for certain loans, however it will be at higher rates.

Does rent count in debt-to-income ratio? ›

These are some examples of payments included in debt-to-income: Monthly mortgage payments (or rent) Monthly expense for real estate taxes.

How to lower debt-to-income ratio quickly? ›

Pay Down Debt

Paying down debt is the most straightforward way to reduce your DTI. The fewer debts you owe, the lower your debt-to-income ratio will be. Suppose that you have a car loan with a monthly payment of $500. You can begin paying an extra $250 toward the principal each month to pay off the vehicle sooner.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What is the highest debt-to-income ratio for FHA? ›

Borrowers must have a minimum credit score of 580 to qualify for the loan. The maximum DTI for FHA loans is 57%. However, a lender can set their own requirement.

What is the maximum debt ratio for USDA? ›

USDA Loan Approval

The standard debt to income (DTI) ratios for the USDA home loan are 29%/41% of the gross monthly income of the applicants. The maximum DTI on a USDA loan is 34%/46% of the gross monthly income.

What debt-to-income ratio is house poor? ›

Lenders usually prefer a front-end DTI of no more than 28 percent and a back-end DTI of 36 percent — often referred to as the 28/36 rule. In some high-cost areas, they may allow the ratios to be greater. Following these guidelines prior to purchasing a home can help you avoid the possibility of becoming house poor.

What percentage does the consumer financial protection bureau cfpb recommend a debt-to-income ratio of no more than? ›

Section 1026.43(e)(2)(vi) provides that, to satisfy the requirements for a qualified mortgage under § 1026.43(e)(2), the ratio of the consumer's total monthly debt payments to total monthly income at the time of consummation cannot exceed 43 percent.

What percentage of gross salary does CFPB take? ›

To maintain a low student loan repayment burden, the Consumer Financial Protection Bureau suggests student loan payments should not exceed 8% of your gross salary.


Top Articles
Latest Posts
Article information

Author: Pres. Lawanda Wiegand

Last Updated:

Views: 5287

Rating: 4 / 5 (71 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Pres. Lawanda Wiegand

Birthday: 1993-01-10

Address: Suite 391 6963 Ullrich Shore, Bellefort, WI 01350-7893

Phone: +6806610432415

Job: Dynamic Manufacturing Assistant

Hobby: amateur radio, Taekwondo, Wood carving, Parkour, Skateboarding, Running, Rafting

Introduction: My name is Pres. Lawanda Wiegand, I am a inquisitive, helpful, glamorous, cheerful, open, clever, innocent person who loves writing and wants to share my knowledge and understanding with you.