Debt-to-Income (DTI) Ratio Calculator
Calculate your back-end DTI ratio to see your mortgage eligibility.
What is a Debt-to-Income (DTI) Ratio?
The Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. Lenders, specifically mortgage providers, use this ratio to determine your ability to manage monthly payments and repay borrowed money.
Gross monthly income is your total pay before taxes and other deductions. Monthly debt includes recurring obligations like rent, car payments, student loans, and minimum credit card payments. It generally does not include living expenses like groceries, utilities, or insurance premiums.
How to Calculate DTI Ratio
The formula for calculating your DTI ratio is straightforward:
Understanding Your DTI Results
| DTI Ratio Range | Lender Interpretation |
|---|---|
| 35% or less | Excellent: You have a healthy balance of debt and income. |
| 36% to 43% | Good: Most lenders will still approve loans, but you are nearing the limit. |
| 44% to 50% | Warning: You may struggle to find traditional financing without significant assets. |
| Over 50% | High Risk: You have very little wiggle room for unexpected expenses. |
Why DTI Matters for Mortgages
For most conventional loans, the "magic number" is often 43%. This is typically the highest DTI ratio a borrower can have and still get a qualified mortgage. Some FHA loans may allow for higher ratios (up to 50% or even 57% in some cases) if the borrower has a high credit score or significant cash reserves.
Real-World Example
Imagine Sarah earns $6,000 per month (Gross Income). Her monthly debts are:
- Mortgage: $1,800
- Car Loan: $400
- Student Loan: $300
- Credit Card Minimum: $100
Total Debt: $2,600
Calculation: ($2,600 / $6,000) = 0.433 or 43.3%
In this scenario, Sarah is right at the edge of the standard qualified mortgage limit.