Debt-to-Income (DTI) Calculator
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Your Back-End DTI Ratio
0%
Front-End Ratio (Housing Only):
0%
Total Monthly Income:
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Total Monthly Debt:
$0
Disposable Income (Pre-Tax):
$0
Understanding Your Debt-to-Income (DTI) Ratio
Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to assess your ability to repay a loan. Unlike your credit score, which measures your history of repayment, DTI measures your current capacity to take on new debt.
What is the DTI Formula?
The calculation is relatively straightforward but must be precise to be accurate for mortgage applications. The formula is:
DTI = (Total Monthly Debt Payments / Gross Monthly Income) x 100
For example, if you earn $6,000 a month before taxes and your total debt obligations (rent, car payment, student loans) equal $2,000, your DTI is 33%.
Front-End vs. Back-End Ratio
Lenders typically look at two types of DTI ratios:
- Front-End Ratio (Housing Ratio): This only calculates your proposed housing expenses (mortgage principal, interest, taxes, insurance, and HOA fees) divided by your income. Lenders typically prefer this to be under 28%.
- Back-End Ratio (Total Debt): This includes your housing costs plus all other recurring monthly debts like credit cards, student loans, and auto loans. Most Conventional loans require this to be under 43%, though FHA loans may allow up to 50% or higher with compensating factors.
Interpreting Your Results
What does your score mean for your financial health?
- 35% or less: Excellent. You have a manageable level of debt relative to your income. Lenders view you as a low-risk borrower.
- 36% to 43%: Good to Manageable. You will likely qualify for most loans, though you might not get the absolute best interest rates if you are at the higher end of this range.
- 44% to 49%: High Risk. You may struggle to find financing for a mortgage. Lenders may require additional down payments or higher interest rates.
- 50% or higher: Critical. You are spending half your gross income on debt. It is highly recommended to reduce debt loads before applying for new credit.
What is Included in "Monthly Debt"?
When using this calculator, ensure you include:
- Minimum monthly credit card payments (not the total balance).
- Auto loan or lease payments.
- Student loan payments.
- Alimony or child support obligations.
- Personal loan payments.
Do not include: Utility bills, grocery costs, or entertainment expenses. DTI focuses strictly on debt obligations.