Debt-to-Income (DTI) Ratio Calculator
Determine your borrowing power and financial health for mortgage approval.
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Total Monthly Debt
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Your DTI Ratio
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What is Debt-to-Income (DTI) Ratio?
Your Debt-to-Income (DTI) ratio is a critical financial metric used by lenders to assess your ability to manage monthly payments and repay debts. It represents the percentage of your gross monthly income that goes toward paying debts.
Why DTI Matters for Mortgages
When you apply for a mortgage, lenders want to ensure you aren't overextended. A lower DTI ratio demonstrates a good balance between debt and income. Most lenders prefer a DTI ratio lower than 36%, with no more than 28% of that debt going towards servicing your mortgage (often called the "front-end ratio").
Understanding Your Score
- 35% or less: Excellent. You are viewed as a safe borrower with manageable debt.
- 36% to 43%: Good/Acceptable. You may still qualify for loans, but terms might be stricter.
- 44% to 50%: Risky. You may find it difficult to get approved for a mortgage. FHA loans might be an option.
- Over 50%: Critical. You have significantly more debt than income allowed by most lending standards. Focus on debt repayment immediately.
How to Calculate DTI Manually
To calculate your DTI manually, follow this formula:
DTI = (Total Monthly Debt Payments / Gross Monthly Income) x 100
For example, if your monthly debts total $2,000 and your gross monthly income is $6,000, your DTI is 33%.
Tips to Lower Your DTI
If your ratio is high, consider paying off high-interest credit cards, refinancing loans to lower monthly payments, or increasing your income through side hustles before applying for a major loan.