Your Debt-to-Income (DTI) ratio is a key financial metric used by lenders, particularly mortgage companies, to assess your ability to manage monthly payments and repay debts. It is expressed as a percentage, representing how much of your gross monthly income goes toward paying off debts.
How to Calculate DTI
The math is simple: Divide your total monthly debt obligations by your gross monthly income (your income before taxes and deductions).
Lenders generally look for a DTI ratio that falls within certain brackets:
36% or Less: This is considered an ideal DTI. You likely have a good balance between debt and income, making you a low-risk borrower.
37% to 43%: This is a manageable range, though some lenders may require additional documentation or higher credit scores to approve a mortgage.
44% to 50%: This is often the upper limit for most mortgage programs (like FHA or conventional loans). You may find it harder to qualify for new credit.
Over 50%: This is considered high risk. More than half of your income is committed to debt, leaving little room for savings or emergency expenses.
Example Calculation
Imagine your gross monthly income is $6,000. Your monthly expenses include a $1,500 mortgage, a $400 car payment, and $300 in credit card minimums. Your total monthly debt is $2,200.
Calculation: ($2,200 / $6,000) = 0.366, or 36.6% DTI.
Tips to Lower Your DTI
If your ratio is higher than you'd like, you can improve it in two ways: decrease your debt or increase your income. Focus on paying down high-interest credit cards first or avoiding new large purchases (like a new vehicle) before applying for a home loan.
function calculateDTIRatio() {
var income = parseFloat(document.getElementById('monthlyIncome').value);
var rent = parseFloat(document.getElementById('rentMortgage').value) || 0;
var car = parseFloat(document.getElementById('carLoans').value) || 0;
var student = parseFloat(document.getElementById('studentLoans').value) || 0;
var credit = parseFloat(document.getElementById('creditCards').value) || 0;
var other = parseFloat(document.getElementById('otherDebt').value) || 0;
var outputDiv = document.getElementById('dti-output');
var percentDisplay = document.getElementById('dti-percentage');
var descDisplay = document.getElementById('dti-description');
if (!income || income <= 0) {
alert("Please enter a valid monthly income greater than zero.");
return;
}
var totalDebt = rent + car + student + credit + other;
var dti = (totalDebt / income) * 100;
outputDiv.style.display = "block";
percentDisplay.innerHTML = dti.toFixed(1) + "%";
outputDiv.className = ""; // Reset classes
if (dti <= 36) {
outputDiv.classList.add('status-good');
descDisplay.innerHTML = "Excellent! Your debt-to-income ratio is in a healthy range. Lenders view this as a sign of financial stability.";
} else if (dti > 36 && dti <= 43) {
outputDiv.classList.add('status-warning');
descDisplay.innerHTML = "Good. Your ratio is manageable, but you may be approaching the limit for some conventional mortgage lenders.";
} else {
outputDiv.classList.add('status-danger');
descDisplay.innerHTML = "High. Your DTI is quite high. You may struggle to qualify for new loans. Consider paying down debts to improve this score.";
}
// Smooth scroll to result on mobile
outputDiv.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}