function calculateDTIRatio() {
var grossIncomeInput = document.getElementById('dtiGrossIncome').value;
var mortgageRentInput = document.getElementById('dtiMortgageRent').value;
var carPaymentInput = document.getElementById('dtiCarPayment').value;
var studentLoanInput = document.getElementById('dtiStudentLoan').value;
var creditCardsInput = document.getElementById('dtiCreditCards').value;
var otherDebtInput = document.getElementById('dtiOtherDebt').value;
var resultDiv = document.getElementById('dtiResult');
// Reset result display style
resultDiv.className = ";
resultDiv.innerHTML = ";
// Parse inputs to floats, defaulting to 0 if empty
var grossIncome = parseFloat(grossIncomeInput) || 0;
var mortgageRent = parseFloat(mortgageRentInput) || 0;
var carPayment = parseFloat(carPaymentInput) || 0;
var studentLoan = parseFloat(studentLoanInput) || 0;
var creditCards = parseFloat(creditCardsInput) || 0;
var otherDebt = parseFloat(otherDebtInput) || 0;
// Validation: Ensure income is positive
if (grossIncome <= 0) {
resultDiv.innerHTML = 'Please enter a valid monthly gross income greater than zero.';
return;
}
// Calculate Total Monthly Debt
var totalMonthlyDebt = mortgageRent + carPayment + studentLoan + creditCards + otherDebt;
// Calculate DTI Ratio
var dtiRatioDecimal = totalMonthlyDebt / grossIncome;
var dtiRatioPercent = (dtiRatioDecimal * 100).toFixed(2);
// Determine Status and Formatting
var statusMessage = '';
var statusClass = '';
if (dtiRatioPercent 36 && dtiRatioPercent <= 43) {
statusMessage = "Manageable, but lenders may require extra scrutiny.";
statusClass = 'dti-result-warn';
} else {
statusMessage = "High Risk. It may be difficult to obtain new credit.";
statusClass = 'dti-result-bad';
}
// Output Result
resultDiv.className = statusClass;
resultDiv.innerHTML = 'Your DTI Ratio is: ' + dtiRatioPercent + '%' + statusMessage + '';
}
Understanding Your 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 compares how much you owe each month to how much you earn before taxes. Essentially, it tells lenders the percentage of your gross monthly income that goes toward paying debts.
Whether you are applying for a mortgage, an auto loan, or a personal line of credit, your DTI ratio is a key factor in the approval process and can influence the interest rates you are offered.
How the DTI Ratio is Calculated
The calculation is straightforward. It involves summing your recurring monthly debt obligations and dividing that total by your gross monthly income.
Monthly Debt Obligations: This includes rent or mortgage payments, car loans, student loans, minimum credit card payments, child support, and alimony. It generally does not include variable expenses like groceries, utilities, or entertainment.
Gross Monthly Income: This is your total income before taxes and other deductions are taken out.
For example, if your gross monthly income is $5,000, and your total monthly debt payments equal $2,000, your DTI ratio would be 40% ($2,000 / $5,000 = 0.40).
Interpreting Your DTI Score
Different lenders have different criteria, but general guidelines for DTI ratios are as follows:
36% or Lower (Ideal): This is considered a healthy DTI ratio. Lenders view borrowers in this range as low risk, indicating you have sufficient income to handle new debt comfortably.
36% to 43% (Manageable): You are likely still approved for credit, but lenders might scrutinize your application more closely. For mortgages, 43% is often the highest DTI a borrower can have to get a Qualified Mortgage.
43% or Higher (High Risk): A DTI above 43% signals financial stretch. Lenders may view you as a high-risk borrower because a significant portion of your income is already tied up in debt payments, making it difficult to qualify for new loans.
How to Improve Your DTI Ratio
If your DTI ratio is higher than you'd like, there are two primary ways to lower it: reduce your monthly debt or increase your income.
Pay Down Debt: Focus on paying off high-interest credit cards or eliminating smaller loans to remove those monthly obligations entirely.
Increase Income: Consider ways to boost your gross monthly earnings, such as seeking a promotion, taking on a side gig, or finding a higher-paying job.
Avoid New Debt: Do not take on any new credit obligations while trying to lower your ratio, especially before a major purchase like buying a home.
Use the calculator above to see where you currently stand and plan your financial future effectively.