Includes credit cards, auto loans, student loans, personal loans, etc.
Understanding Your Debt-to-Income Ratio (DTI)
The Debt-to-Income ratio, commonly known as DTI, is a crucial financial metric used by lenders and financial advisors to assess your ability to manage monthly payments and repay debts. It compares your total monthly debt payments to your total monthly gross income. A lower DTI generally indicates a lower risk for lenders and a healthier financial situation for you.
How to Calculate DTI
The formula for calculating DTI is straightforward:
Monthly Housing Payment: Enter your total expected monthly housing expenses. This includes your rent payment or your mortgage principal and interest (P&I), plus property taxes, homeowner's insurance, and any HOA fees (often referred to as PITI + HOA).
Total Monthly Debt Payments: Add up all your other minimum monthly debt obligations. This typically includes credit card minimum payments, car loan payments, student loan payments, personal loan payments, alimony, and child support payments. Do NOT include utilities, phone bills, or other living expenses here.
Total Monthly Gross Income: This is your income before any taxes or deductions are taken out. If you have multiple income sources, add them all together. For self-employed individuals, it's generally best to use your net adjusted income if you're applying for a mortgage, but for general DTI calculation, using gross income from tax returns is often a good starting point.
Once you input these figures, the calculator will provide your DTI as a percentage.
Why DTI Matters
Lending Decisions: Lenders, especially mortgage lenders, heavily rely on DTI to determine if they can approve your loan and how much they are willing to lend. Different loan types have different DTI thresholds. For example, many conventional mortgages prefer a DTI of 43% or lower, while FHA loans might allow slightly higher.
Financial Health Indicator: A high DTI can signal financial strain, indicating that a large portion of your income is already committed to debt, leaving less for savings, unexpected expenses, or discretionary spending. This can make it harder to obtain new credit or cope with financial emergencies.
Budgeting and Financial Planning: Understanding your DTI can motivate you to reduce debt or increase income. A lower DTI provides more financial flexibility and peace of mind.
Interpreting Your DTI
35% or Less: Generally considered good. You likely have a healthy financial standing and good borrowing potential.
36% – 43%: Acceptable, but on the higher side. You may face stricter lending terms or need to improve your financial situation.
44% – 50%: Considered high. Lenders may be hesitant, and you might struggle to qualify for new loans. Focus on debt reduction.
Over 50%: Very high. This indicates significant financial risk, and it will likely be very difficult to obtain new credit. Prioritizing debt repayment is essential.
This calculator is for informational purposes only and does not guarantee loan approval. Always consult with a financial advisor for personalized advice.
function calculateDTI() {
var monthlyRentMortgage = parseFloat(document.getElementById("monthlyRentMortgage").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var monthlyGrossIncome = parseFloat(document.getElementById("monthlyGrossIncome").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous result
// Validate inputs
if (isNaN(monthlyRentMortgage) || monthlyRentMortgage < 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(monthlyGrossIncome) || monthlyGrossIncome <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
resultDiv.style.backgroundColor = "#dc3545"; // Red for error
return;
}
var totalMonthlyDebt = monthlyRentMortgage + monthlyDebtPayments;
var dti = (totalMonthlyDebt / monthlyGrossIncome) * 100;
var resultHTML = dti.toFixed(2) + "%";
var interpretation = "";
if (dti <= 35) {
interpretation = "Generally considered excellent.";
resultDiv.style.backgroundColor = "var(–success-green)";
} else if (dti <= 43) {
interpretation = "Acceptable, but on the higher side.";
resultDiv.style.backgroundColor = "var(–primary-blue)";
} else if (dti <= 50) {
interpretation = "Considered high. Focus on debt reduction.";
resultDiv.style.backgroundColor = "#ffc107"; // Warning yellow
} else {
interpretation = "Very high. Significant financial risk.";
resultDiv.style.backgroundColor = "#dc3545"; // Red for danger
}
resultDiv.innerHTML = resultHTML + interpretation;
}