Debt-to-Income (DTI) Ratio Calculator
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Understanding Your Debt-to-Income (DTI) Ratio
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 repayment history, the DTI ratio measures your repayment capacity. It represents the percentage of your gross monthly income that goes toward paying your monthly debt obligations.
Front-End vs. Back-End Ratio
When applying for a mortgage, lenders look at two types of DTI ratios:
- Front-End Ratio (Housing Ratio): This only includes your projected housing costs (mortgage principal, interest, taxes, insurance, and HOA fees) divided by your gross income. Lenders typically prefer this to be under 28%.
- Back-End Ratio (Total DTI): This includes housing costs plus all other monthly debts (credit cards, student loans, car payments, alimony). This is the more important number. Most lenders cap this at 43% for a Qualified Mortgage, though some FHA or VA loans may allow up to 50% with compensating factors.
How to Calculate DTI: The Formula
The math behind the DTI ratio is straightforward:
Formula: (Total Monthly Debt Payments / Gross Monthly Income) × 100
Realistic Example
Let's look at a realistic scenario for a homebuyer named Alex:
- Gross Income: $6,000/month
- New Mortgage & Taxes: $1,800/month
- Car Loan: $400/month
- Student Loans: $300/month
- Credit Cards (Min Payment): $100/month
Total Debt: $1,800 + $400 + $300 + $100 = $2,600
Calculation: ($2,600 / $6,000) × 100 = 43.3%
In this example, Alex is right at the limit for many conventional loans and might need to pay down the credit card debt to qualify comfortably.
What is a Good DTI Ratio?
- Under 36%: Excellent. You are viewed as a low-risk borrower.
- 36% – 43%: Acceptable. You will likely qualify for a mortgage, but perhaps not the most aggressive rates.
- 43% – 49%: Concerning. You may only qualify for FHA loans or require a co-signer.
- 50%+: Critical. It is very difficult to obtain new financing. Focus on debt consolidation or income generation.
How to Lower Your DTI
If your ratio is too high, you have two levers to pull: increase income or decrease debt. The fastest way to improve your DTI for a mortgage application is to pay off debts with high monthly payments but low balances (like a credit card with a $500 balance but a $50 minimum payment).
function calculateDTI() {
// 1. Get Input Values
// Using parseFloat to ensure we treat them as numbers.
// OR 0 ensures that empty fields are treated as zero.
var grossIncome = parseFloat(document.getElementById('grossIncome').value) || 0;
var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0;
var mortgageRent = parseFloat(document.getElementById('mortgageRent').value) || 0;
var hoaInsurance = parseFloat(document.getElementById('hoaInsurance').value) || 0;
var autoLoans = parseFloat(document.getElementById('autoLoans').value) || 0;
var studentLoans = parseFloat(document.getElementById('studentLoans').value) || 0;
var creditCards = parseFloat(document.getElementById('creditCards').value) || 0;
var otherDebts = parseFloat(document.getElementById('otherDebts').value) || 0;
// 2. Validate Income
if (grossIncome + otherIncome <= 0) {
alert("Please enter a valid Gross Monthly Income greater than zero.");
return;
}
// 3. Perform Calculations
var totalIncome = grossIncome + otherIncome;
var housingCosts = mortgageRent + hoaInsurance;
var otherLiabilities = autoLoans + studentLoans + creditCards + otherDebts;
var totalDebts = housingCosts + otherLiabilities;
var frontEndRatio = (housingCosts / totalIncome) * 100;
var backEndRatio = (totalDebts / totalIncome) * 100;
// 4. Update UI with Results
// Currency Formatting
var currencyFormatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('displayTotalIncome').innerHTML = currencyFormatter.format(totalIncome);
document.getElementById('displayTotalDebt').innerHTML = currencyFormatter.format(totalDebts);
document.getElementById('displayFrontRatio').innerHTML = frontEndRatio.toFixed(2) + "%";
document.getElementById('displayBackRatio').innerHTML = backEndRatio.toFixed(2) + "%";
// 5. Determine Status and Colors
var statusHtml = "";
var backRatioElem = document.getElementById('displayBackRatio');
var analysisText = "";
if (backEndRatio < 36) {
statusHtml = '
Excellent';
backRatioElem.style.color = "#27ae60";
analysisText = "Your DTI is excellent. Lenders view you as a low-risk borrower.";
} else if (backEndRatio <= 43) {
statusHtml = '
Good';
backRatioElem.style.color = "#27ae60";
analysisText = "Your DTI is within the acceptable range for most qualified mortgages.";
} else if (backEndRatio <= 50) {
statusHtml = '
Concern';
backRatioElem.style.color = "#f39c12";
analysisText = "Your DTI is high. You may face stricter requirements or higher interest rates.";
} else {
statusHtml = '
Critical';
backRatioElem.style.color = "#c0392b";
analysisText = "Your DTI is very high. It may be difficult to secure new financing without reducing debt.";
}
document.getElementById('dtiStatus').innerHTML = statusHtml;
document.getElementById('analysisText').innerHTML = analysisText;
// Show Results Area
document.getElementById('results-area').style.display = "block";
}