Calculate your Debt-to-Income (DTI) ratio, a key metric for mortgage lenders.
Your Debt-to-Income Ratio:
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Understanding Your Debt-to-Income Ratio (DTI) for Home Loans
The Debt-to-Income (DTI) ratio is a crucial financial metric used by mortgage lenders to assess your ability to manage monthly mortgage and loan payments and to repay your debts. It compares your total monthly debt payments to your gross monthly income. A lower DTI ratio generally indicates a lower risk for the lender, making you a more attractive candidate for a home loan.
Total Monthly Debt Payments include all recurring debt obligations, such as:
Your estimated new monthly mortgage payment (including principal, interest, property taxes, and homeowner's insurance – often called PITI). If you're just estimating, lenders will calculate this for you. For this calculator, we use your current rent or mortgage as a proxy for the housing portion.
Minimum monthly credit card payments (not the total balance).
Car loan payments.
Student loan payments.
Personal loan payments.
Alimony or child support payments.
Any other installment loans or revolving credit.
Gross Monthly Income is your income before taxes and other deductions. This typically includes your salary, wages, bonuses, commissions, and any other verifiable income sources.
Why is DTI Important for Home Loans?
Lenders use your DTI ratio to gauge how much of your income is already committed to debt. A high DTI suggests that you may struggle to make your mortgage payments in addition to your existing debts, increasing the risk of default.
Most lenders have specific DTI limits for mortgage approval. While these can vary, common guidelines are:
Front-end DTI (Housing Ratio): Typically, lenders prefer this to be no more than 28% (monthly housing costs / gross monthly income).
Back-end DTI (Total Debt Ratio): This is what our calculator focuses on. Lenders generally look for a back-end DTI of 36% or lower for conventional loans. Some loan programs, like FHA loans, may allow for higher DTIs (up to 43% or even higher in specific cases), but this often requires compensating factors like a higher credit score or larger down payment.
Keeping your DTI ratio low is essential for securing a mortgage and ensuring you can comfortably afford your new home. Reducing debt and increasing income are the primary ways to improve your DTI.