Your Debt-to-Income (DTI) ratio is a personal financial measure that compares your monthly debt payments to your monthly gross income. Lenders, specifically mortgage lenders, use this ratio to measure your ability to manage monthly payments and repay the money you plan to borrow.
How to Calculate Your DTI Ratio
The math behind DTI is straightforward. You take your total monthly debt obligations and divide them by your gross monthly income (your pay before taxes and deductions).
Lenders generally look for a DTI ratio that falls within specific ranges to determine your creditworthiness:
36% or Less: This is considered excellent. It indicates you have a healthy balance of debt and income, making you a low-risk borrower.
37% to 43%: Most lenders view this as manageable, though you may face stricter scrutiny for certain loan types.
44% to 50%: This is considered high. You may find it difficult to qualify for a mortgage or may be required to provide additional financial documentation.
Over 50%: This is a warning sign that you may have trouble meeting all your financial obligations.
Real-World Example
Imagine you earn $6,000 per month (Gross Income). Your monthly expenses are:
Mortgage: $1,800
Car Loan: $400
Student Loan: $300
Credit Card Minimum: $100
Your total monthly debt is $2,600. Using the formula: ($2,600 / $6,000) x 100 = 43.3% DTI. In this scenario, you would be at the upper limit for most conventional mortgage approvals.
function calculateDTI() {
var grossIncome = parseFloat(document.getElementById('grossIncome').value);
var rentMortgage = parseFloat(document.getElementById('rentMortgage').value) || 0;
var carPayment = parseFloat(document.getElementById('carPayment').value) || 0;
var studentLoans = parseFloat(document.getElementById('studentLoans').value) || 0;
var creditCards = parseFloat(document.getElementById('creditCards').value) || 0;
var otherDebts = parseFloat(document.getElementById('otherDebts').value) || 0;
var resultDiv = document.getElementById('dtiResult');
var dtiValueDisplay = document.getElementById('dtiValue');
var dtiStatusDisplay = document.getElementById('dtiStatus');
var dtiDescDisplay = document.getElementById('dtiDescription');
if (!grossIncome || grossIncome <= 0) {
alert("Please enter a valid Gross Monthly Income.");
return;
}
var totalDebt = rentMortgage + carPayment + studentLoans + creditCards + otherDebts;
var dti = (totalDebt / grossIncome) * 100;
var dtiFixed = dti.toFixed(1);
resultDiv.style.display = "block";
dtiValueDisplay.innerHTML = "Your DTI Ratio: " + dtiFixed + "%";
if (dti 36 && dti 43 && dti <= 50) {
resultDiv.style.backgroundColor = "#ffeeba";
resultDiv.style.color = "#856404";
dtiStatusDisplay.innerHTML = "Status: High";
dtiDescDisplay.innerHTML = "Your debt levels are high compared to your income. You may have difficulty qualifying for new credit lines.";
} else {
resultDiv.style.backgroundColor = "#f8d7da";
resultDiv.style.color = "#721c24";
dtiStatusDisplay.innerHTML = "Status: Very High";
dtiDescDisplay.innerHTML = "A ratio above 50% often indicates significant financial strain. It is recommended to reduce debt before applying for new loans.";
}
}