function calculateDTI() {
// Get Input Values
var incomeInput = document.getElementById('grossMonthlyIncome').value;
var rentInput = document.getElementById('monthlyRentMortgage').value;
var carInput = document.getElementById('carPayment').value;
var studentInput = document.getElementById('studentLoans').value;
var ccInput = document.getElementById('creditCardMin').value;
var otherInput = document.getElementById('otherDebts').value;
// Parse Values (Default to 0 if empty or NaN)
var income = parseFloat(incomeInput);
var rent = parseFloat(rentInput);
var car = parseFloat(carInput);
var student = parseFloat(studentInput);
var cc = parseFloat(ccInput);
var other = parseFloat(otherInput);
// Validation: Income is required to avoid divide by zero
if (isNaN(income) || income <= 0) {
alert("Please enter a valid Gross Monthly Income greater than zero.");
return;
}
// Handle empty inputs for debts
if (isNaN(rent)) rent = 0;
if (isNaN(car)) car = 0;
if (isNaN(student)) student = 0;
if (isNaN(cc)) cc = 0;
if (isNaN(other)) other = 0;
// Calculate Totals
var totalDebt = rent + car + student + cc + other;
var dtiRatio = (totalDebt / income) * 100;
// Display Formatting
document.getElementById('displayIncome').innerText = "$" + income.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayDebt').innerText = "$" + totalDebt.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('dtiPercentValue').innerText = dtiRatio.toFixed(2) + "%";
// Determine Status
var statusElement = document.getElementById('dtiStatusText');
var resultContainer = document.getElementById('dtiResult');
// Remove previous status classes
statusElement.classList.remove('status-good', 'status-warn', 'status-bad');
resultContainer.style.borderColor = "#3182ce"; // Reset border
if (dtiRatio 35 && dtiRatio 43 && dtiRatio <= 50) {
statusElement.innerText = "Concern: You may face higher interest rates or rejection.";
statusElement.classList.add('status-bad');
resultContainer.style.borderLeftColor = "#e53e3e";
} else {
statusElement.innerText = "Critical: Difficult to obtain new credit.";
statusElement.classList.add('status-bad');
resultContainer.style.borderLeftColor = "#e53e3e";
}
// Show Results
resultContainer.style.display = "block";
}
Understanding Your Debt-to-Income (DTI) Ratio
Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to evaluate your financial health. Unlike your credit score, which measures your history of paying back debts, the DTI ratio measures your capacity to repay new debt based on your current income.
Whether you are applying for a mortgage, an auto loan, or a personal line of credit, lenders want to ensure that adding a new monthly payment won't push your finances to the breaking point. This calculator helps you estimate your "back-end ratio," which includes all monthly debt obligations.
How the DTI Formula Works
The calculation is relatively straightforward but requires accuracy regarding your pre-tax figures. The formula used by lenders is:
Gross Monthly Income: This is your income before taxes and deductions are taken out. It includes salary, bonuses, alimony received, and pension income.
Recurring Monthly Debts: This includes rent or mortgage payments (including property tax and insurance), car payments, student loans, credit card minimums, and child support/alimony payments.
Exclusions: Generally, you do not include monthly utility bills, grocery costs, or entertainment subscriptions (like Netflix) in this calculation.
Interpreting Your Results
Once you have used the calculator above, it is important to understand what the percentage means for your borrowing potential.
35% or Lower (Excellent):
Most lenders view a DTI under 35% as ideal. It indicates that you have plenty of disposable income to manage new debt. You are likely to qualify for the lowest interest rates.
36% to 43% (Good to Manageable):
This is the standard range for mortgage approvals. Specifically, the "Qualified Mortgage" rule often sets 43% as the maximum DTI for approval, though some lenders may go higher with compensating factors.
44% to 50% (High Risk):
At this level, you may struggle to find approval for a mortgage. If you are approved, you will likely be required to pay higher interest rates or provide a larger down payment.
Above 50% (Critical):
With more than half your gross income going toward debt, you have very little financial flexibility. Lenders will view you as a high default risk. Prioritize debt repayment before applying for new credit.
Real-World Example
Let's look at a realistic scenario to see how DTI impacts borrowing power:
Imagine John earns $6,000 per month (gross).
Rent: $1,500
Car Payment: $400
Student Loans: $300
Credit Cards: $200
Total Debt: $2,400
John's calculation: ($2,400 / $6,000) = 0.40, or 40% DTI. While John is managing his bills, he is nearing the upper limit. If he were to apply for a new loan that costs $300/month, his debt would rise to $2,700, pushing his DTI to 45%, which might disqualify him from a standard mortgage.
Strategies to Lower Your DTI
If your ratio is higher than 43%, consider these steps before applying for a loan:
Increase Income: Taking on a side gig or negotiating a raise increases the denominator in the formula, lowering the percentage even if debt stays the same.
Pay Off Small Balances: Focus on eliminating specific monthly obligations. Paying off a car loan completely removes that monthly payment from the calculation, whereas paying down a credit card balance only lowers the minimum payment slightly.
Refinance High-Interest Debt: consolidating high-interest credit card debt into a lower-interest personal loan can sometimes reduce your total monthly obligation.