Debt-to-Income (DTI) Ratio Calculator
$
$
$
$
$
$
Your DTI Ratio
–%
Total Monthly Debt: $0
Understanding Your Debt-to-Income Ratio
Your Debt-to-Income (DTI) ratio is a critical financial metric used by lenders to assess your ability to manage monthly payments and repay debts. It compares your total monthly debt payments to your gross monthly income.
How is DTI Calculated?
The formula is simple: (Total Monthly Debt Payments / Gross Monthly Income) x 100.
This calculator includes standard debts such as housing costs (rent or mortgage), auto loans, credit card minimum payments, student loans, and other personal debts like alimony or child support.
What is a Good DTI Ratio?
Lenders generally categorize DTI ratios into three tiers:
- 36% or less: Considered excellent. You likely have manageable debt and disposable income. Lenders view you as a low-risk borrower.
- 37% to 43%: This is manageable but acceptable. You may still qualify for most mortgages, but you might not get the absolute best interest rates. Qualified Mortgages typically require a DTI of 43% or lower.
- 44% or higher: Considered risky. Lenders may worry about your ability to take on new debt. You may face difficulties getting approved for a mortgage or personal loan.
Front-End vs. Back-End Ratio
This calculator determines your Back-End Ratio, which includes all debts. Lenders also look at the Front-End Ratio, which only counts housing costs. Ideally, your housing costs alone should not exceed 28% of your gross income.
How to Lower Your DTI
To improve your ratio, you can either increase your income or reduce your monthly debt obligations. Paying off small credit card balances or refinancing high-interest loans to lower monthly payments are effective strategies.