Debt-to-Income (DTI) Calculator
Calculate your Front-End and Back-End DTI Ratios for Mortgage Qualification
Gross Monthly Income:
$0.00
Total Monthly Debt:
$0.00
Front-End Ratio (Housing Only):
0.00%
Back-End Ratio (Total DTI):
0.00%
Understanding Your Debt-to-Income Ratio
Your Debt-to-Income (DTI) ratio is a critical financial metric used by lenders to determine your ability to manage monthly payments and repay debts. It compares your total monthly debt payments to your gross monthly income.
Front-End vs. Back-End Ratio
Lenders typically look at two types of DTI ratios:
- Front-End Ratio: This strictly covers your housing expenses (mortgage principal, interest, taxes, insurance, and HOA fees) divided by your gross income. Ideally, this should be under 28%.
- Back-End Ratio: This includes your housing expenses plus all other recurring debt (car loans, credit cards, student loans, etc.). Most conventional loans require this to be under 36%, though some FHA loans allow up to 43% or even 50% with compensating factors.
How to Calculate DTI
The formula for the Back-End DTI ratio is straightforward:
(Total Monthly Debt Payments / Gross Monthly Income) x 100 = DTI %
For example, if your gross monthly income is $5,000 and your total monthly debts equal $2,000, your DTI is 40%.
What is a Good DTI Ratio?
- 35% or less: Considered excellent. Lenders view you as a safe borrower.
- 36% to 43%: Manageable, but you may face higher interest rates or stricter down payment requirements.
- 44% to 49%: High risk. You may struggle to get approved for standard mortgages.
- 50% or higher: Critical. You likely need to pay down debt or increase income before applying for new credit.
Tips to Improve Your DTI
If your ratio is too high, consider paying off small balances to eliminate monthly payments entirely (the "snowball method"). Unlike credit utilization, which looks at total balance, DTI looks at monthly obligations. Eliminating a $50/month credit card minimum payment helps your DTI more than paying down a large loan balance that doesn't change the monthly due amount.