Income Tax Calculator by Hourly Rate

Debt-to-Income (DTI) Ratio Calculator

1. Monthly Gross Income

Enter your total income before taxes.

2. Monthly Debt Payments

Enter the minimum monthly payment for each.

function calculateDTI() { // 1. Retrieve and parse inputs var grossIncomeStr = document.getElementById('dti-gross-income').value; var rentMortgageStr = document.getElementById('dti-rent-mortgage').value; var carLoansStr = document.getElementById('dti-car-loans').value; var creditCardsStr = document.getElementById('dti-credit-cards').value; var studentLoansStr = document.getElementById('dti-student-loans').value; var otherDebtStr = document.getElementById('dti-other-debt').value; // Convert to floats, defaulting to 0 if empty or invalid var grossIncome = parseFloat(grossIncomeStr) || 0; var rentMortgage = parseFloat(rentMortgageStr) || 0; var carLoans = parseFloat(carLoansStr) || 0; var creditCards = parseFloat(creditCardsStr) || 0; var studentLoans = parseFloat(studentLoansStr) || 0; var otherDebt = parseFloat(otherDebtStr) || 0; var resultDiv = document.getElementById('dti-result'); // 2. Validation: Ensure income is provided before calculating ratio if (grossIncome <= 0) { resultDiv.style.display = 'block'; resultDiv.style.backgroundColor = '#f8d7da'; resultDiv.style.color = '#721c24'; resultDiv.innerHTML = 'Error: Please enter a Gross Monthly Income greater than zero to calculate your ratio.'; return; } // 3. Calculate Total Monthly Debt var totalMonthlyDebt = rentMortgage + carLoans + creditCards + studentLoans + otherDebt; // 4. Calculate DTI Ratio var dtiDecimal = totalMonthlyDebt / grossIncome; var dtiPercentage = (dtiDecimal * 100); // 5. Determine Interpretation and styling based on standard lender thresholds var statusMessage = "; var statusColor = "; // Thresholds based on typical mortgage lending guidelines if (dtiPercentage <= 36) { statusMessage = 'Excellent: Most lenders view this ratio favorably.'; statusColor = '#28a745'; // Green } else if (dtiPercentage <= 43) { statusMessage = 'Manageable: You may still qualify for many loans, but lenders will look closely.'; statusColor = '#ffc107'; // Yellow/Orange document.getElementById('dti-result').style.color = '#212529'; // Ensure text is readable on yellow } else if (dtiPercentage <= 50) { statusMessage = 'High Risk: Lenders may view this as risky. Getting approved for new credit will be difficult.'; statusColor = '#dc3545'; // Red } else { statusMessage = 'Critical: Your debt is significantly high relative to income. Focus on debt reduction immediately.'; statusColor = '#8b0000'; // Dark Red } // 6. Display Results resultDiv.style.display = 'block'; resultDiv.style.backgroundColor = '#e9ecef'; // Reset background resultDiv.style.color = '#333'; // Reset text color resultDiv.innerHTML = '

' + '

Total Monthly Debt Payments:

' + '

$' + totalMonthlyDebt.toFixed(2) + '

' + '

Gross Monthly Income:

' + '

$' + grossIncome.toFixed(2) + '

' + '

' + '

Your DTI Ratio: ' + dtiPercentage.toFixed(2) + '%

' + " + statusMessage + "; }

Understanding Your Debt-to-Income (DTI) Ratio

Your Debt-to-Income (DTI) ratio is a critical percentage that personal finance experts and lenders use to gauge your financial health. It measures the amount of your monthly gross income that goes toward paying debts. In essence, it answers the question: can you afford the debt you currently have, and can you handle more?

Lenders, particularly mortgage lenders, rely heavily on DTI to determine your creditworthiness. A lower ratio indicates a good balance between debt and income, while a higher ratio suggests that your finances are stretched thin.

How Is DTI Calculated?

The formula for calculating your DTI is relatively straightforward. The calculator above does the heavy lifting, but it helps to understand the underlying math:

DTI = (Total Recurring Monthly Debt Payments / Gross Monthly Income) x 100

What Counts as "Gross Income"?

Your gross income is the total amount of money you earn before any taxes, insurance, or retirement contributions are taken out. If you earn a salary of $60,000 per year, your gross monthly income is $5,000 ($60,000 / 12).

What Counts as "Monthly Debt"?

This includes recurring monthly obligations that typically appear on your credit report. You should include the minimum monthly payment for:

• Rent or current mortgage payments (including property taxes and homeowners insurance/HOA fees).
• Auto loans or lease payments.
• Student loan minimum payments.
• The minimum monthly payments on all credit cards (even if you pay them off in full, lenders use the minimum obligation).
• Personal loans or other secured debts.
• Court-ordered payments like alimony or child support.

Note: Do not include variable living expenses like groceries, utilities (electricity, water), gas, or entertainment costs in your debt calculation.

Interpreting Your DTI Results

While different lenders have different criteria, there are general benchmarks for DTI ratios used in the financial industry:

• 36% or Less (Ideal): This is considered a healthy DTI ratio. You have manageable debt relative to your income, and lenders view you as a low-risk borrower.
• 37% – 43% (Manageable): You are in a decent position, but you are approaching the limit for what many lenders are comfortable with. For Qualified Mortgages, 43% is often the maximum threshold for approval.
• 44% – 50% (High Risk): Getting approved for a new loan, especially a mortgage, becomes very difficult. Lenders may require a larger down payment, higher reserves, or deny the application altogether.
• Over 50% (Critical): This indicates you are severely overleveraged. More than half of your pre-tax income goes to debt before you even buy groceries or pay rent. Prioritize debt reduction immediately.

Example Scenario

Let's say you earn a gross monthly income of $5,000. Your monthly debts are:

• Rent: $1,500
• Car Payment: $400
• Credit Card Minimums: $200

Your total monthly debt is $2,100. Your DTI calculation would be ($2,100 / $5,000) = 0.42, or 42%. This ratio falls into the "manageable" category, meaning you would likely qualify for a loan, but lenders would scrutinize your finances closely.