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, your DTI ratio measures your ability to manage monthly payments and repay debts. It is calculated by dividing your total monthly debt payments by your gross monthly income.
How to Calculate DTI
The formula for DTI is straightforward but requires accuracy regarding your financial obligations. The calculation is:
For example, if your gross monthly income is $5,000 and your total debt payments (rent, car, loans, credit cards) equal $2,000, your DTI is 40%.
What Lenders Include in "Debt"
When using this calculator, ensure you include recurring debt obligations such as:
Housing Costs: Rent or mortgage payments (including principal, interest, taxes, and insurance).
Vehicle Loans: Monthly lease or loan payments.
Student Loans: Required monthly payments on educational debt.
Credit Cards: The minimum monthly payment required, not the total balance.
Other Debts: Personal loans, child support, or alimony.
Note: Regular living expenses like groceries, utilities, and entertainment are generally not included in the DTI calculation.
Interpreting Your DTI Score
Lenders categorize DTI ratios into three general tiers to determine risk:
35% or Less (Good): This is the ideal range. It indicates you have manageable debt relative to your income. Lenders view you as a low-risk borrower, and you are likely to qualify for the best interest rates.
36% to 43% (Manageable): You are likely to get approved for loans, but lenders may ask for additional documentation. 43% is often the highest ratio a borrower can have and still get a Qualified Mortgage.
44% or Higher (Risky): At this level, lenders may view you as high-risk. You might struggle to find a loan, or you may only qualify for subprime loans with significantly higher interest rates. It is recommended to pay down debt before applying for a mortgage.
The 43% Rule for Mortgages
In the United States, 43% is a critical number in real estate finance. Under the "Ability-to-Repay" rule, most lenders cannot sell a mortgage to Fannie Mae or Freddie Mac if the borrower's DTI exceeds 43%. While FHA and VA loans sometimes allow higher ratios (up to 50% or more with compensating factors), staying below 43% is crucial for conventional financing.
Front-End vs. Back-End Ratio
This calculator primarily determines your Back-End Ratio, which includes all debts. However, lenders also look at the Front-End Ratio, which only calculates housing costs divided by income. Typically, lenders prefer a front-end ratio no higher than 28%.
function calculateDTI() {
// 1. Get Input Values
var income = document.getElementById('monthlyIncome').value;
var housing = document.getElementById('rentMortgage').value;
var auto = document.getElementById('autoLoans').value;
var student = document.getElementById('studentLoans').value;
var cards = document.getElementById('creditCards').value;
var other = document.getElementById('otherDebt').value;
// 2. Parse values to floats, default to 0 if empty or NaN
var incomeVal = parseFloat(income) || 0;
var housingVal = parseFloat(housing) || 0;
var autoVal = parseFloat(auto) || 0;
var studentVal = parseFloat(student) || 0;
var cardsVal = parseFloat(cards) || 0;
var otherVal = parseFloat(other) || 0;
// 3. Validation: Income must be greater than 0
if (incomeVal <= 0) {
alert("Please enter a valid Gross Monthly Income greater than 0.");
return;
}
// 4. Calculate Total Debt
var totalDebt = housingVal + autoVal + studentVal + cardsVal + otherVal;
// 5. Calculate DTI Ratio
var dtiRatio = (totalDebt / incomeVal) * 100;
var disposable = incomeVal – totalDebt;
// 6. Display Results
var resultContainer = document.getElementById('result-container');
var dtiValueElement = document.getElementById('dti-value');
var dtiStatusElement = document.getElementById('dti-status');
var displayIncome = document.getElementById('display-income');
var displayDebt = document.getElementById('display-debt');
var displayRemaining = document.getElementById('display-remaining');
resultContainer.style.display = "block";
dtiValueElement.innerText = dtiRatio.toFixed(2) + "%";
// Format currency for breakdown
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
displayIncome.innerText = formatter.format(incomeVal);
displayDebt.innerText = formatter.format(totalDebt);
displayRemaining.innerText = formatter.format(disposable);
// 7. Determine Status and Styling
dtiStatusElement.className = "result-status"; // Reset classes
dtiValueElement.style.color = "#333";
if (dtiRatio 35 && dtiRatio 43 && dtiRatio <= 50) {
dtiStatusElement.innerText = "High Risk – Difficult to qualify";
dtiStatusElement.classList.add("status-red");
dtiValueElement.style.color = "#c92a2a";
} else {
dtiStatusElement.innerText = "Critical – Action Required";
dtiStatusElement.classList.add("status-red");
dtiValueElement.style.color = "#c92a2a";
}
}
{
"@context": "https://schema.org",
"@type": "FAQPage",
"mainEntity": [{
"@type": "Question",
"name": "What is a good debt-to-income ratio?",
"acceptedAnswer": {
"@type": "Answer",
"text": "Generally, a DTI ratio of 36% or less is considered good. Lenders view ratios up to 43% as acceptable for most conventional mortgages, though ratios above this limit may require FHA or VA loan programs."
}
}, {
"@type": "Question",
"name": "Does DTI affect credit score?",
"acceptedAnswer": {
"@type": "Answer",
"text": "No, your DTI ratio is not part of your credit score calculation. However, the amount of debt you owe (credit utilization) is a major factor in your credit score."
}
}, {
"@type": "Question",
"name": "How can I lower my DTI?",
"acceptedAnswer": {
"@type": "Answer",
"text": "You can lower your DTI by increasing your income or paying off monthly debts. The most effective method is usually paying off debts with high monthly payments, such as credit card balances or auto loans."
}
}]
}