Debt-to-income ratio (often abbreviated DTI) is the percentage of your gross monthly income that goes toward monthly debt payments. Lenders use it to gauge how much of your income is already committed to existing debts and whether you can reasonably take on more.

How DTI is calculated

DTI is computed as: (Total monthly debt payments ÷ Gross monthly income) × 100.

Example: $1,500 in monthly debt payments (mortgage + car + credit card minimums) on $5,000 in gross monthly income = 30% DTI.

What counts as “debt” in DTI

Included in the calculation:

• Mortgage or rent payment
• Auto loan payments
• Student loan payments
• Credit card minimum payments
• Personal loan payments
• Alimony or child support paid

Generally not included: utilities, groceries, insurance premiums, taxes, entertainment, subscriptions.

What DTI ratios lenders look for

For personal loans, most lenders prefer a DTI under 40%, with some flexibility up to 50% for borrowers with strong credit and stable employment. Mortgage lenders typically want 43% or lower as a hard cap, though FHA loans allow up to 50% in some cases.

Nationwide doesn’t apply a single hard DTI cutoff. Our underwriters consider DTI in the context of income stability, employment history, and the purpose of the loan. A borrower with 45% DTI but strong job tenure and a debt-consolidation purpose (which will reduce their DTI once the loan is funded) may still qualify.

How to improve your DTI before applying

Two paths: increase income (raise, second job, documented side income) or reduce monthly debt (pay down a card, refinance an auto loan to a longer term, pay off a small balance entirely). The fastest improvement usually comes from paying off any debt with a small remaining balance — it removes the monthly payment entirely.

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