Debt-to-Income (DTI) Ratio Calculator
Determine your financial health and mortgage eligibility instantly.
Your Debt-to-Income Ratio is:
0%
What is Debt-to-Income (DTI) Ratio?
The Debt-to-Income (DTI) ratio is a critical financial metric used by lenders, especially mortgage providers, to measure an individual's ability to manage monthly payments and repay debts. It is calculated by dividing your total monthly debt obligations by your gross monthly income (your income before taxes and deductions).
Why Your DTI Ratio Matters
From an SEO and financial planning perspective, understanding your DTI is the first step toward homeownership. Lenders use this ratio to determine your risk level. A lower DTI suggests you have a good balance between debt and income, while a high ratio indicates you may be overextended.
- Mortgage Approval: Most conventional lenders prefer a DTI ratio of 36% or lower, though some programs allow up to 43% or even 50% in specific cases.
- Interest Rates: A lower DTI can often help you secure more competitive interest rates.
- Financial Flexibility: Keeping your DTI low ensures you have enough cash flow for savings and emergencies.
Example Calculation
Imagine you have the following monthly finances:
- Gross Monthly Income: $6,000
- Mortgage: $1,500
- Car Loan: $400
- Credit Card Minimums: $100
Total Monthly Debt: $2,000
Calculation: ($2,000 / $6,000) * 100 = 33.33% DTI
How to Improve Your DTI Ratio
If your results are higher than desired, consider these strategies:
- Aggressive Debt Paydown: Focus on high-interest credit cards to lower your monthly minimum obligations.
- Increase Income: Bonuses, side hustles, or raises increase the denominator of the equation, lowering your ratio.
- Avoid New Debt: Postpone financing new vehicles or large purchases until after your mortgage application.