Debt-to-Income (DTI) Ratio Calculator
Determine your eligibility for a mortgage or loan by calculating your back-end DTI ratio.
Monthly Recurring Debts
function calculateDTIRatio() { // Get input values using var var grossIncomeStr = document.getElementById('dtiGrossIncome').value; var housingStr = document.getElementById('dtiHousing').value; var carLoansStr = document.getElementById('dtiCarLoans').value; var studentLoansStr = document.getElementById('dtiStudentLoans').value; var creditCardsStr = document.getElementById('dtiCreditCards').value; var otherDebtStr = document.getElementById('dtiOtherDebt').value; // Parse floats, handling empty strings as 0 for debts var grossIncome = parseFloat(grossIncomeStr) || 0; var housing = parseFloat(housingStr) || 0; var carLoans = parseFloat(carLoansStr) || 0; var studentLoans = parseFloat(studentLoansStr) || 0; var creditCards = parseFloat(creditCardsStr) || 0; var otherDebt = parseFloat(otherDebtStr) || 0; var resultDiv = document.getElementById('dti-result'); // Validation: Income must be greater than 0 if (grossIncome <= 0) { resultDiv.style.display = 'block'; resultDiv.innerHTML = 'Please enter a valid Monthly Gross Income greater than zero.'; return; } // Calculate Total Monthly Debt var totalMonthlyDebt = housing + carLoans + studentLoans + creditCards + otherDebt; // Calculate DTI Ratio var dtiRatio = (totalMonthlyDebt / grossIncome) * 100; // Determine interpretation and styling class var interpretation = ''; var statusClass = ''; if (dtiRatio 36 && dtiRatio <= 43) { interpretation = 'Acceptable. You will likely qualify for a mortgage, but perhaps not the lowest interest rates.'; statusClass = 'dti-score-warning'; } else { interpretation = 'High Risk. Most lenders limit conventional mortgages to borrowers with a DTI below 43%. You may face difficulty qualifying.'; statusClass = 'dti-score-danger'; } // Format results var formattedTotalDebt = totalMonthlyDebt.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,'); var formattedDTI = dtiRatio.toFixed(1); // Display results resultDiv.style.display = 'block'; resultDiv.innerHTML = 'Understanding Debt-to-Income (DTI) Ratio for Home Financing
When applying for a substantial loan, such as a mortgage, lenders look beyond just your credit score. They need to verify that you have enough income to comfortably handle the new loan payments on top of your existing financial obligations. The primary metric they use to assess this is the Debt-to-Income (DTI) ratio.
Your DTI ratio is a percentage that represents the portion of your gross monthly income that goes toward paying debts. Lenders prefer low DTI ratios because it indicates a good balance between income and debt, suggesting you are a lower-risk borrower.
How is DTI Calculated?
This calculator computes your "back-end" DTI, which is the most comprehensive figure lenders use. The formula is relatively straightforward:
DTI = (Total Recurring Monthly Debts / Gross Monthly Income) x 100
To get an accurate result, you must include all recurring debts. For example, if your gross income is $6,000 a month, and you have a potential mortgage payment of $1,800, a car payment of $400, and student loan payments of $300, your total debt is $2,500. Your DTI would be ($2,500 / $6,000) = 41.7%.
What Debts Are Included?
- Proposed Housing Costs: Principal, interest, property taxes, homeowners insurance, and HOA fees.
- Installment Loans: Auto loans, student loans, and personal loans.
- Revolving Credit: Minimum monthly payments on credit cards, credit lines, or HELOCs.
- Other Obligations: Alimony or child support payments.
Note: DTI does not usually include variable expenses like groceries, utilities, gas, or entertainment.
Interpreting Your Results: The 43% Rule
While different lenders have different criteria based on the loan type (FHA, VA, Conventional), there are general benchmarks accepted in the industry:
- 36% or Less (Ideal): This is considered a healthy DTI ratio. It shows lenders you have significant disposable income and should easily manage new debt.
- 37% to 43% (Acceptable): Many borrowers fall into this range. You will likely qualify for a mortgage, though you might be asked to provide extra documentation or may not receive top-tier interest rates.
- Above 43% (High Risk): Under the "Ability-to-Repay" rule established after the 2008 financial crisis, 43% is generally the maximum DTI allowed for a Qualified Mortgage (QM). While some lenders offer non-QM loans above this threshold, they typically come with higher rates and stricter requirements.
How to Improve Your DTI Ratio
If your DTI is higher than 43%, or if you want to improve your chances of getting a better interest rate, you have two primary levers to pull: increase income or decrease debt.
- Pay Down Revolving Debt: Focus on aggressively paying down credit card balances. Lowering your minimum monthly payment requirement has an immediate positive impact on your DTI.
- Avoid New Debt: Do not finance a new car or open new credit accounts leading up to a mortgage application.
- Increase Gross Income: This could involve seeking a raise, taking on a second job, or documenting alternative income sources (like bonuses or commissions) with a two-year history.
Using this calculator provides a baseline for understanding where you stand financially before approaching a lender.