Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to assess your creditworthiness. Unlike your credit score, which tracks your payment history, the DTI ratio measures your ability to manage monthly payments and repay debts. It is essentially the percentage of your gross monthly income that goes toward paying debts.
Front-End vs. Back-End Ratio
When calculating DTI, there are actually two numbers lenders look at:
Front-End Ratio: This strictly looks at your housing expenses (rent or mortgage, property taxes, insurance, and HOA fees) divided by your gross income. Lenders typically prefer this to be under 28%.
Back-End Ratio: This is the most common "DTI" number. It includes housing expenses plus all other recurring debt (car loans, student loans, credit cards, alimony). Most lenders prefer this to be under 36%, though some loan programs allow up to 43% or even 50%.
How to Calculate DTI
The formula for calculating your Debt-to-Income ratio is relatively straightforward:
For example, if your gross monthly income is $5,000 and your total monthly debt obligations equal $2,000, your DTI is 40%.
What is a Good DTI Score?
Different loan types have different thresholds, but generally:
Under 36%: Excellent. You are viewed as a low-risk borrower.
36% – 43%: Good. You can likely get approved for most loans, including Conventional and FHA mortgages, though you might not get the absolute best interest rates.
43% – 50%: Borderline. You may still qualify for FHA loans, but approval might require "compensating factors" like high cash reserves.
Over 50%: High Risk. Lenders generally view you as having too much debt relative to your income, making it difficult to qualify for a mortgage.
Frequently Asked Questions
Does DTI affect my credit score?
No, your DTI ratio is not part of your credit score calculation. However, high credit card balances (credit utilization) do affect your score and also increase your monthly minimum payments, which raises your DTI.
Does rent count towards DTI?
If you are applying for a mortgage, your current rent does not count as a debt because it will be replaced by the new mortgage payment. However, if you are applying for a car loan or personal loan, lenders may consider rent as a monthly obligation.
Should I use gross or net income?
Always use Gross Income (your income before taxes and deductions) when calculating DTI for lending purposes. Lenders base their calculations on your pre-tax earnings.
function calculateDTI() {
// Get Input Values
var annualIncome = parseFloat(document.getElementById("grossAnnualIncome").value);
var housing = parseFloat(document.getElementById("monthlyHousing").value);
var car = parseFloat(document.getElementById("monthlyCar").value);
var student = parseFloat(document.getElementById("monthlyStudent").value);
var credit = parseFloat(document.getElementById("monthlyCredit").value);
var other = parseFloat(document.getElementById("monthlyOther").value);
// Validation: Ensure Annual Income is valid
if (isNaN(annualIncome) || annualIncome <= 0) {
alert("Please enter a valid Gross Annual Income greater than zero.");
return;
}
// Handle NaN for debts (treat empty inputs as 0)
if (isNaN(housing)) housing = 0;
if (isNaN(car)) car = 0;
if (isNaN(student)) student = 0;
if (isNaN(credit)) credit = 0;
if (isNaN(other)) other = 0;
// Calculations
var monthlyIncome = annualIncome / 12;
var totalNonHousingDebt = car + student + credit + other;
var totalMonthlyDebt = housing + totalNonHousingDebt;
var frontEndRatio = (housing / monthlyIncome) * 100;
var backEndRatio = (totalMonthlyDebt / monthlyIncome) * 100;
// Display Formatting
document.getElementById("displayMonthlyIncome").innerText = "$" + monthlyIncome.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("displayTotalDebt").innerText = "$" + totalMonthlyDebt.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("displayFrontRatio").innerText = frontEndRatio.toFixed(2) + "%";
document.getElementById("displayBackRatio").innerText = backEndRatio.toFixed(2) + "%";
// Logic for Status Status and Message
var statusSpan = document.getElementById("dtiStatus");
var messageP = document.getElementById("dtiMessage");
statusSpan.className = "dti-status"; // Reset class
if (backEndRatio <= 36) {
statusSpan.innerText = "Excellent";
statusSpan.classList.add("status-good");
messageP.innerText = "Your DTI is in the excellent range. Lenders view you as a low-risk borrower.";
} else if (backEndRatio <= 43) {
statusSpan.innerText = "Good";
statusSpan.classList.add("status-warning");
messageP.innerText = "Your DTI is acceptable for most mortgage types, including Conventional and FHA loans.";
} else if (backEndRatio <= 50) {
statusSpan.innerText = "High Risk";
statusSpan.classList.add("status-danger");
messageP.innerText = "Your DTI is high. You may face difficulties getting approved or may require FHA financing with strict requirements.";
} else {
statusSpan.innerText = "Critical";
statusSpan.classList.add("status-danger");
messageP.innerText = "Your DTI is very high. Consider paying down debt before applying for new loans.";
}
// Show Results
document.getElementById("resultsBox").style.display = "block";
}