Debt-to-Income Ratio Calculator
Gross Monthly Income
Before taxes and deductions
$
Monthly Rent or Mortgage
$
Credit Card Minimum Payments
Total minimums for all cards
$
Student & Auto Loans
$
Alimony / Child Support / Other
$
Your Debt-to-Income Ratio is:
0%
What is a Debt-to-Income (DTI) Ratio?
Your Debt-to-Income (DTI) ratio is a personal finance measure that compares the amount of debt you have to your overall income. Lenders, including mortgage lenders and credit card issuers, use this ratio to measure your ability to manage your monthly payments and repay the money you plan to borrow.
Essentially, it answers the question: "For every dollar this person earns, how much is already committed to paying off debt?"
How is DTI Calculated?
The formula for calculating your DTI is relatively straightforward. It involves two main figures:
- Total Monthly Debt Payments: This includes your rent or mortgage, student loans, auto loans, minimum credit card payments, and court-ordered payments like child support. It does not usually include variable expenses like groceries, utilities, or gas.
- Gross Monthly Income: This is your total income before taxes, insurance, or 401(k) contributions are deducted.
The Formula:
(Total Monthly Debt / Gross Monthly Income) x 100 = DTI %
Example Calculation
Imagine your financial situation looks like this:
- Gross Income: $5,000 per month
- Rent: $1,500
- Car Loan: $400
- Student Loan: $300
- Credit Cards: $100
Your total monthly debt is $2,300 ($1,500 + $400 + $300 + $100).
To find your DTI: ($2,300 / $5,000) = 0.46, or 46%.
Interpreting Your Result
Different lenders have different standards, but general guidelines are:
- 35% or less (Good): This is viewed favorably by lenders. It suggests you have manageable debt relative to your income and have disposable income remaining.
- 36% to 43% (Moderate): You may still qualify for loans, but lenders might see you as a slightly higher risk. You might get higher interest rates. 43% is often the highest DTI a borrower can have to get a Qualified Mortgage.
- 44% or higher (High Risk): Lenders may deny your application because they worry you won't have enough money left over to handle unexpected expenses.
Front-End vs. Back-End DTI
Sometimes lenders look at two specific types of DTI:
- Front-End Ratio: Only counts housing costs (rent/mortgage, property tax, insurance) divided by income. Ideally, this should be under 28%.
- Back-End Ratio: Counts all monthly debt payments (housing + consumer debt). ideally, this should be under 36%.
How to Lower Your DTI
If your ratio is high, you can improve it by:
- Increasing your income: Taking on a side gig, asking for a raise, or working overtime increases the denominator in the calculation.
- Paying down debt: Focus on eliminating monthly obligations. Paying off a car loan or clearing a credit card balance removes that monthly payment from the numerator.
- Refinancing: Lowering your interest rate or extending a loan term can lower monthly payments (though it may cost more in interest over time).