Debt-to-Income (DTI) Ratio Calculator
Calculate your DTI percentage to understand your mortgage approval odds.
1. Monthly Income
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2. Monthly Debts
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Your Debt-to-Income Ratio
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Total Monthly Income
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Total Monthly Debt
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Disposable Income
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What is 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 manage monthly payments and repay debts. It represents the percentage of your gross monthly income that goes toward paying debts.
Unlike your credit score, which measures your credit history, the DTI calculator measures your current financial capacity. Lenders prefer a lower DTI because it suggests you have sufficient income to handle new debt obligations, such as a mortgage or auto loan.
How to Calculate DTI Ratio
The formula used in this DTI calculator is straightforward:
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
To use this formula accurately:
- Gross Monthly Income: This is your income before taxes and deductions. Include salary, bonuses, alimony received, and rental income.
- Total Monthly Debt: Include recurring debt obligations like rent/mortgage, car payments, student loans, credit card minimums, and child support. Generally, you do not include expenses like groceries, utilities, or gas.
What is a Good DTI Ratio for a Mortgage?
When applying for a home loan, your DTI falls into one of three general categories:
1. The "Green Zone" (35% or Less)
A DTI of 35% or lower is considered excellent. It indicates that your debt is manageable relative to your income. Lenders view you as a low-risk borrower, and you are likely to qualify for the best interest rates.
2. The "Caution Zone" (36% to 43%)
This range is generally acceptable for most lenders. You will likely still qualify for a mortgage, but you may be asked to provide additional documentation. 43% is often cited as the highest ratio a borrower can have and still get a "Qualified Mortgage."
3. The "Red Zone" (44% or Higher)
Once your DTI exceeds 43%, obtaining a mortgage becomes significantly harder. While FHA loans sometimes allow DTIs up to 50% with compensating factors (like large cash reserves), conventional lenders may reject the application or charge higher interest rates to offset the risk.
Front-End vs. Back-End DTI
There are technically two types of DTI ratios lenders look at:
- Front-End Ratio: This only calculates your housing expenses (mortgage principal, interest, taxes, and insurance) divided by your gross income. Lenders typically prefer this to be under 28%.
- Back-End Ratio: This includes housing expenses plus all other recurring debts (credit cards, loans, etc.). This is the number calculated by the tool above and is the more important figure for total approval.
How to Lower Your DTI Ratio
If your calculation shows a percentage in the red zone, consider these strategies before applying for a loan:
- Pay off small balances: Eliminating a credit card balance removes that minimum monthly payment from the equation completely.
- Refinance loans: Lowering the interest rate or extending the term on a car loan can reduce the monthly obligation, improving your ratio.
- Increase income: Taking on a side hustle or asking for a raise increases the denominator in the formula, lowering the overall percentage.
- Add a co-borrower: Adding a spouse or partner with income to the application can significantly improve the combined DTI ratio.