The Debt-to-Income (DTI) ratio is a crucial metric that lenders use to evaluate your ability to manage monthly payments and repay debts. It compares your total monthly debt payments to your gross monthly income. A lower DTI generally indicates a lower risk for lenders, making it easier to qualify for loans like mortgages.
How to Calculate DTI
The calculation is straightforward. You need two main components:
Total Monthly Debt Payments: This includes your anticipated housing payment (rent or mortgage, including property taxes and insurance if applicable) plus all other recurring monthly debt obligations. Examples of other debt payments include:
Minimum credit card payments
Car loan payments
Student loan payments
Personal loan payments
Alimony or child support payments
Important Note: Utilities, groceries, cell phone bills, and other living expenses are NOT included in DTI calculations.
Gross Monthly Income: This is your total income before any taxes or deductions are taken out. It includes your salary, wages, tips, commissions, bonuses, and any other regular income sources.
Lenders typically use DTI ratios to assess risk. Here's a general guideline, though specific thresholds can vary by lender and loan type:
35% or Less: Generally considered good. You likely have a manageable debt load.
36% – 43%: Acceptable for many lenders, especially for mortgages, but may require stronger credit.
44% – 49%: Considered high. It might be difficult to qualify for new credit, especially a mortgage.
50% or More: Very high. This indicates a significant portion of your income is going towards debt, making it very challenging to obtain new loans.
Why DTI Matters
Understanding and improving your DTI ratio is vital for several reasons:
Loan Approvals: A lower DTI increases your chances of getting approved for loans, particularly mortgages, and can sometimes lead to better interest rates.
Financial Health: A high DTI can be a sign of financial strain, indicating that a large portion of your income is committed to debt repayment, leaving less for savings, emergencies, or discretionary spending.
Budgeting: Calculating your DTI helps you understand where your money is going and can motivate you to reduce debt or increase your income.
By using this calculator, you can quickly assess your current DTI and take steps to improve it, paving the way for future financial goals.
function calculateDTI() {
var monthlyRentOrMortgage = parseFloat(document.getElementById("monthlyRentOrMortgage").value);
var otherMonthlyDebtPayments = parseFloat(document.getElementById("otherMonthlyDebtPayments").value);
var totalMonthlyIncome = parseFloat(document.getElementById("totalMonthlyIncome").value);
var dtiPercentageElement = document.getElementById("dtiPercentage");
var dtiInterpretationElement = document.getElementById("dtiInterpretation");
// Clear previous results and styling
dtiPercentageElement.textContent = "–";
dtiInterpretationElement.textContent = "";
dtiPercentageElement.style.color = "#28a745"; // Reset to default green
// Validate inputs
if (isNaN(monthlyRentOrMortgage) || monthlyRentOrMortgage < 0 ||
isNaN(otherMonthlyDebtPayments) || otherMonthlyDebtPayments < 0 ||
isNaN(totalMonthlyIncome) || totalMonthlyIncome <= 0) {
dtiInterpretationElement.textContent = "Please enter valid positive numbers for all fields. Income must be greater than zero.";
return;
}
var totalMonthlyDebt = monthlyRentOrMortgage + otherMonthlyDebtPayments;
var dti = (totalMonthlyDebt / totalMonthlyIncome) * 100;
dtiPercentageElement.textContent = dti.toFixed(2) + "%";
var interpretation = "";
if (dti <= 35) {
interpretation = "Excellent! Your DTI is 35% or less, indicating strong financial health and a good position for new credit.";
dtiPercentageElement.style.color = "#28a745"; // Success Green
} else if (dti <= 43) {
interpretation = "Good. Your DTI is between 36% and 43%. While acceptable for many lenders, improving it can offer more options.";
dtiPercentageElement.style.color = "#ffc107"; // Warning Yellow
} else if (dti <= 49) {
interpretation = "High. Your DTI is between 44% and 49%. This may make qualifying for new credit challenging. Consider debt reduction strategies.";
dtiPercentageElement.style.color = "#fd7e14"; // Orange/Warning
} else {
interpretation = "Very High. Your DTI is 50% or more. This indicates significant financial strain and will likely make obtaining new credit very difficult.";
dtiPercentageElement.style.color = "#dc3545"; // Danger Red
}
dtiInterpretationElement.textContent = interpretation;
}