Your Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payment to their monthly gross income. It is one of the primary metrics lenders use to determine your ability to manage monthly payments and repay debts.
Why Does DTI Matter?
When you apply for a mortgage, car loan, or personal loan, lenders want to know if you can afford the payments. A high DTI ratio suggests that you may be over-leveraged, while a low DTI demonstrates a good balance between debt and income.
Understanding the Thresholds
35% or Less (Good): This is generally viewed favorably by lenders. It indicates that you have manageable debt relative to your income and likely have disposable income remaining.
36% to 49% (Caution): You may still qualify for loans, but lenders might see you as a higher risk. You may be asked to provide additional documentation or accept a higher interest rate.
50% or Higher (Critical): With more than half your income going to debt, you have limited flexibility for unexpected expenses. Many mortgage lenders will decline applications with a DTI above 43-50%.
How to Calculate DTI
The formula for calculating your DTI is straightforward:
For example, if your gross monthly income is $5,000 and your total monthly debt payments (rent, car, cards) equal $2,000, your DTI is 40%.
Tips to Improve Your DTI Ratio
Pay down high-interest debt: Focus on eliminating credit card balances to lower your monthly minimums.
Increase your income: Consider a side hustle or ask for a raise to increase the denominator in the calculation.
Avoid new debt: Do not open new credit lines before applying for a major loan like a mortgage.
function calculateDTI() {
// Get inputs
var income = parseFloat(document.getElementById('grossMonthlyIncome').value);
var rent = parseFloat(document.getElementById('rentMortgage').value) || 0;
var car = parseFloat(document.getElementById('carLoans').value) || 0;
var student = parseFloat(document.getElementById('studentLoans').value) || 0;
var cards = parseFloat(document.getElementById('creditCards').value) || 0;
var other = parseFloat(document.getElementById('otherDebt').value) || 0;
// Validation
if (isNaN(income) || income <= 0) {
alert("Please enter a valid Gross Monthly Income greater than zero.");
return;
}
// Calculations
var totalDebt = rent + car + student + cards + other;
var dti = (totalDebt / income) * 100;
// Update Result Display
document.getElementById('results-area').style.display = 'block';
document.getElementById('dtiResult').innerText = dti.toFixed(2) + '%';
document.getElementById('totalDebtResult').innerText = '$' + totalDebt.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlyIncomeResult').innerText = '$' + income.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Determine Status
var statusDiv = document.getElementById('dtiStatus');
statusDiv.className = 'status-message'; // Reset classes
if (dti <= 35) {
statusDiv.classList.add('status-good');
statusDiv.innerHTML = "Excellent! Your DTI is below 36%, which lenders view as a healthy balance of debt and income.";
} else if (dti > 35 && dti < 50) {
statusDiv.classList.add('status-warn');
statusDiv.innerHTML = "Caution. Your DTI is between 36% and 49%. You may still qualify for loans, but lenders may consider you a moderate risk.";
} else {
statusDiv.classList.add('status-bad');
statusDiv.innerHTML = "Critical. Your DTI is 50% or higher. Lenders may have difficulty approving new credit lines. Focus on paying down debt.";
}
}