Income to Debt Ratio Calculator

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Income to Debt Ratio (DTI) Calculator

function calculateDTI() { var rent = parseFloat(document.getElementById('rentMortgage').value) || 0; var car = parseFloat(document.getElementById('carPayment').value) || 0; var cards = parseFloat(document.getElementById('creditCards').value) || 0; var students = parseFloat(document.getElementById('studentLoans').value) || 0; var other = parseFloat(document.getElementById('otherDebts').value) || 0; var income = parseFloat(document.getElementById('grossIncome').value) || 0; var resultDiv = document.getElementById('dti-result-box'); if (income <= 0) { resultDiv.style.display = 'block'; resultDiv.style.backgroundColor = '#fce4ec'; resultDiv.style.color = '#c2185b'; document.getElementById('ratioOutput').innerHTML = "Invalid Income"; document.getElementById('categoryOutput').innerHTML = "Please enter a gross monthly income greater than 0."; document.getElementById('totalDebtOutput').innerHTML = ""; return; } var totalMonthlyDebt = rent + car + cards + students + other; var dtiRatio = (totalMonthlyDebt / income) * 100; resultDiv.style.display = 'block'; document.getElementById('ratioOutput').innerHTML = dtiRatio.toFixed(2) + "%"; document.getElementById('totalDebtOutput').innerHTML = "Total Monthly Debt Obligations: " + totalMonthlyDebt.toFixed(2); var category = ""; var bgColor = ""; var textColor = ""; if (dtiRatio 36 && dtiRatio 43 && dtiRatio <= 50) { category = "High: You may find it difficult to borrow additional funds."; bgColor = "#fffde7"; textColor = "#fbc02d"; } else { category = "Critical: You may be overleveraged. Consider debt consolidation or reduction."; bgColor = "#ffebee"; textColor = "#c62828"; } resultDiv.style.backgroundColor = bgColor; resultDiv.style.color = textColor; document.getElementById('categoryOutput').innerHTML = category; }

What is the Income to Debt Ratio?

The Income to Debt Ratio, also known as the Debt-to-Income (DTI) ratio, is a financial metric used by lenders to measure an individual's ability to manage monthly payments and repay debts. It compares your total monthly debt obligations to your gross monthly income (your income before taxes and deductions).

How to Calculate Your DTI Ratio

To calculate your ratio manually, follow these steps:

  1. Sum your monthly debts: Include your rent or mortgage, car loans, student loans, minimum credit card payments, and any child support or alimony.
  2. Identify your gross monthly income: This is your total pay before any taxes, health insurance, or 401k contributions are taken out.
  3. Divide and Multiply: Divide the total debt by the gross income, then multiply by 100 to get a percentage.

Standard DTI Thresholds

While every lender has different criteria, these are the general benchmarks used in the financial industry:

  • 36% or Less: This is considered an ideal ratio. Lenders view you as a low-risk borrower with a healthy balance between debt and income.
  • 43%: This is typically the maximum DTI ratio a borrower can have and still qualify for a Qualified Mortgage.
  • 50% or More: This is often the "danger zone." At this level, more than half of your income is committed to debt, leaving little room for savings or emergency expenses.

Practical Example

Imagine Sarah earns 5,000 per month (Gross Income). Her monthly expenses are as follows:

  • – Mortgage: 1,200
  • – Car Loan: 300
  • – Student Loan: 200
  • – Credit Card Minimum: 100

Total Monthly Debt: 1,800

Calculation: (1,800 / 5,000) = 0.36

DTI Ratio: 36%. Sarah is in excellent financial standing according to most mortgage lenders.

Tips to Improve Your Ratio

If your ratio is too high, you have two primary levers to pull: Increase your income or Decrease your monthly debt payments. Since increasing income takes time, focusing on paying off high-interest credit cards or refinancing a high-payment car loan can provide immediate relief to your DTI ratio.

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