Your debt-to-income ratio (DTI) is one of the most important metrics lenders evaluate when you apply for a loan. A high DTI can prevent you from qualifying for favorable mortgage terms or even getting approved in the first place.
Whether you’re looking to buy a home or gain more financial control, learning how to improve your debt-to-income ratio is crucial—and achievable with the right approach.
In this article, we’ll break down practical, actionable strategies to help you lower your DTI, track your progress, and build a stronger financial foundation.
💡 Why Improving Your DTI Matters
A lower DTI reflects well on your financial health and increases your creditworthiness in the eyes of lenders. Here’s how improving your DTI can benefit you:
- ✅ Better loan terms and lower interest rates
- ✅ Easier mortgage and credit approval
- ✅ Less stress from monthly payments
- ✅ A stronger overall financial profile
According to experts at Experian, a DTI under 36% is considered ideal for most borrowers.
If your DTI exceeds 43%—especially for FHA or VA loans—it’s time to take action.
🔍 What’s a Good Debt-to-Income Ratio?
Here’s what lenders generally prefer:
- 36% or lower for conventional loans
- Up to 50% for FHA loans (with compensating factors)
- Below 41% for USDA and VA loans
Want more insights? Read our detailed guide: What Is a Good Debt-to-Income Ratio
🧰 10 Actionable Ways to Improve Debt-to-Income Ratio
Let’s explore the best ways to reduce your DTI while still living your life:
1. 🧾 Pay Down High-Interest Debt First
Tackle credit cards and personal loans with high APRs. Reducing these debts can quickly lower your monthly obligations and positively impact your DTI.
Pro Tip: Use the debt avalanche method to prioritize high-interest balances.
2. 🔄 Refinance or Consolidate Existing Loans
Refinancing to a lower interest rate or consolidating multiple debts can reduce your monthly payments. Tools like NerdWallet’s loan comparison calculator can help you find suitable options.
3. 💸 Increase Your Monthly Income
This can be done by:
- Asking for a raise
- Starting freelance work or a part-time job
- Launching a profitable side hustle
Every extra dollar in income improves the ratio between earnings and debt.
4. 📉 Avoid Taking on New Debt
Hold off on:
- Opening new credit cards
- Financing a car
- Taking personal loans unless absolutely necessary
New debt adds to your obligations, worsening your DTI instantly.
5. 🗓️ Make Extra Loan Payments
Even one additional payment a year can shave off months—or years—from your loan term. Focus extra payments on principal to speed up progress.
6. 🚫 Cancel Unused Subscriptions
$10 here, $15 there—it adds up. Cancel unnecessary subscriptions such as:
- Streaming services
- Fitness memberships
- Apps or software tools
Review your bank statements monthly to identify unused services.
7. 🏡 Consider a Co-Borrower for Mortgage
If you’re applying for a mortgage, adding a co-borrower with higher income or lower debt can help bring down your overall combined DTI.
8. 📊 Recalculate Your DTI Every Month
As you lower debt or boost income, monitor your DTI improvements using our free DTI calculator.
It’ll keep you motivated and focused.
9. 📋 Create a Monthly Budget
Budgeting ensures you know exactly where your money goes. Free tools like Mint or YNAB (You Need A Budget) can help you stay on track and limit overspending.
10. 🧠 Get Financial Counseling
Sometimes an outside perspective helps. Certified credit counselors from organizations like the National Foundation for Credit Counseling (NFCC) can provide personalized advice to help lower your DTI strategically.
📈 How to Track Your Progress
DTI isn’t a set-it-and-forget-it metric. Re-evaluate your ratio every month, especially when you:
- Pay off a large debt
- Start earning more
- Plan to apply for a loan
You can find full instructions here: How to Calculate Debt-to-Income Ratio
🧠 How Long Does It Take to Improve DTI?
That depends on your efforts. Here’s a rough timeline:
- Short-term (1–3 months): Small gains from reducing subscriptions or making extra payments
- Mid-term (4–6 months): Noticeable improvement if you consistently pay down debt or increase income
- Long-term (6–12 months): Substantial reduction through refinancing or debt consolidation
Be patient—financial transformation is a marathon, not a sprint.
🔗 Resources to Support Your Journey
✨ Final Thoughts
Improving your debt-to-income ratio isn’t just about getting approved for a mortgage—it’s about taking back control of your finances. With consistent effort, smart planning, and the right tools, you can reshape your financial future.
Use the steps above to start lowering your DTI today. Every step you take is one closer to financial freedom.