Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to assess your ability to repay a new loan. Unlike your credit score, which measures your credit history, the DTI ratio measures your current financial capacity. It represents the percentage of your gross monthly income that goes toward paying your monthly debt obligations.
Lenders calculate this to ensure you aren't overleveraged. If too much of your paycheck is already committed to existing debts (like car loans, student loans, and credit cards), you are statistically more likely to default on a new mortgage or personal loan.
What is a Good DTI Ratio?
While requirements vary by lender and loan type, general guidelines break down as follows:
35% or lower: Considered excellent. You have manageable debt and likely have disposable income. Lenders view you as a low-risk borrower.
36% to 43%: This is the standard range for most mortgage approvals. You are eligible for most loans, though you may not get the absolute best interest rates if you are at the higher end.
44% to 49%: Considered high risk. You may still find lenders willing to work with you (especially for FHA loans), but you will likely face higher interest rates or be required to have significant cash reserves.
50% or higher: Borrowing becomes very difficult. Most lenders will reject mortgage applications at this level because you have very little financial flexibility to handle emergencies.
Front-End vs. Back-End Ratio
When applying for a mortgage, you might hear about two different types of ratios:
Front-End Ratio: This only calculates your housing-related expenses (mortgage principal, interest, taxes, insurance, and HOA fees) divided by your income. Lenders typically prefer this to be under 28%.
Back-End Ratio: This is what the calculator above provides. It includes housing costs plus all other recurring monthly debts (credit cards, car loans, student loans). This is the more important figure for final loan approval.
How to Lower Your DTI Ratio
If your calculation shows a percentage higher than 43%, consider these strategies before applying for a major loan:
Pay off small balances: Eliminate credit card balances completely to remove the minimum monthly payment from the equation.
Increase your income: Taking on a side gig or negotiating a raise increases the denominator in the calculation, instantly lowering your DTI.
Avoid new debt: Do not open new credit lines or buy a car in the months leading up to a mortgage application.
function calculateDTI() {
// 1. Get Input Values
var annualIncome = document.getElementById('annualIncome').value;
var monthlyHousing = document.getElementById('monthlyHousing').value;
var monthlyCreditCards = document.getElementById('monthlyCreditCards').value;
var monthlyCarLoans = document.getElementById('monthlyCarLoans').value;
var monthlyStudentLoans = document.getElementById('monthlyStudentLoans').value;
// 2. Validate Income
if (annualIncome === "" || parseFloat(annualIncome) <= 0) {
alert("Please enter a valid Annual Gross Income greater than 0.");
return;
}
// 3. Parse Values (Default to 0 if empty)
var incomeAnnual = parseFloat(annualIncome);
var house = monthlyHousing === "" ? 0 : parseFloat(monthlyHousing);
var cards = monthlyCreditCards === "" ? 0 : parseFloat(monthlyCreditCards);
var cars = monthlyCarLoans === "" ? 0 : parseFloat(monthlyCarLoans);
var loans = monthlyStudentLoans === "" ? 0 : parseFloat(monthlyStudentLoans);
// 4. Calculate Monthly Income and Total Monthly Debt
var monthlyIncome = incomeAnnual / 12;
var totalMonthlyDebt = house + cards + cars + loans;
// 5. Calculate Ratio
var dtiRatio = (totalMonthlyDebt / monthlyIncome) * 100;
// 6. Display Result
var resultDiv = document.getElementById('dti-result');
var percentageDiv = document.getElementById('dti-percentage');
var analysisDiv = document.getElementById('dti-analysis');
resultDiv.style.display = 'block';
percentageDiv.innerHTML = dtiRatio.toFixed(2) + "%";
// 7. Logic for Status Message
var message = "";
var className = "";
if (dtiRatio <= 35) {
message = "Excellent! Your debt load is low relative to your income. You are in a great position to apply for new credit or mortgages.";
className = "status-good";
} else if (dtiRatio > 35 && dtiRatio <= 43) {
message = "Good / Manageable. You fall within the standard guidelines for most lenders (Qualified Mortgage limit is typically 43%).";
className = "status-warn";
} else if (dtiRatio > 43 && dtiRatio <= 50) {
message = "High Risk. You are above the preferred 43% limit. Some lenders may approve you with compensating factors, but you should try to lower debt.";
className = "status-warn";
} else {
message = "Critical. Your debt obligations are very high compared to your income. It will be difficult to secure new financing without increasing income or paying off debts.";
className = "status-bad";
}
// Apply classes and messages
analysisDiv.className = "result-analysis " + className;
analysisDiv.innerHTML = message;
}