Debt Ratio Calculator

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Debt-to-Income (DTI) Ratio Calculator

Your Debt-to-Income Ratio is:

function calculateDebtRatio() { var rent = parseFloat(document.getElementById('rentMortgage').value) || 0; var auto = parseFloat(document.getElementById('autoLoans').value) || 0; var student = parseFloat(document.getElementById('studentLoans').value) || 0; var credit = parseFloat(document.getElementById('creditCards').value) || 0; var other = parseFloat(document.getElementById('otherDebts').value) || 0; var income = parseFloat(document.getElementById('grossIncome').value) || 0; var resultContainer = document.getElementById('dti-result-container'); var percentageDisplay = document.getElementById('dti-percentage'); var statusDisplay = document.getElementById('dti-status'); var interpretationDisplay = document.getElementById('dti-interpretation'); if (income <= 0) { alert("Please enter a valid gross monthly income (greater than 0)."); return; } var totalDebt = rent + auto + student + credit + other; var dtiRatio = (totalDebt / income) * 100; var formattedDti = dtiRatio.toFixed(2); resultContainer.style.display = 'block'; percentageDisplay.innerText = formattedDti + "%"; if (dtiRatio 35 && dtiRatio 43 && dtiRatio <= 50) { resultContainer.style.backgroundColor = "#ffebee"; statusDisplay.style.color = "#c62828"; statusDisplay.innerText = "Caution (High)"; interpretationDisplay.innerText = "Your debt ratio is high. You may find it difficult to qualify for new loans, and you might have limited funds for savings or emergencies."; } else { resultContainer.style.backgroundColor = "#fce4ec"; statusDisplay.style.color = "#880e4f"; statusDisplay.innerText = "Critical (Overleveraged)"; interpretationDisplay.innerText = "Your debt payments consume more than half of your gross income. It is highly recommended to seek financial counseling or focus aggressively on debt reduction."; } }

What is a Debt-to-Income (DTI) Ratio?

Your Debt-to-Income (DTI) ratio is a personal financial metric that compares the amount of debt you pay every month to your overall gross monthly income. Lenders, specifically mortgage providers, use this percentage to measure your ability to manage monthly payments and repay the money you plan to borrow.

The Debt Ratio Formula

To calculate your DTI manually, use the following logic:

(Total Monthly Debt Payments รท Gross Monthly Income) x 100 = Debt Ratio %

Note: Gross Monthly Income refers to your total earnings before taxes and other deductions are taken out of your paycheck.

What DTI Ratio do Lenders Look For?

While different loan programs have varying requirements, here are the general industry benchmarks for DTI ratios:

  • 36% or Less: This is considered an ideal ratio. It suggests you have a healthy amount of disposable income after all debts are paid.
  • 43%: For many mortgage lenders, this is the maximum DTI ratio a borrower can have to still qualify for a "Qualified Mortgage."
  • 50% or Higher: At this level, you are considered "overleveraged." Most of your income is spoken for, leaving very little "wiggle room" for unexpected expenses.

Example Calculation

Let's look at a realistic scenario:

  • Monthly Rent: $1,500
  • Car Loan: $400
  • Credit Card Minimum: $100
  • Total Monthly Debt: $2,000
  • Gross Monthly Income: $6,000
  • Calculation: ($2,000 / $6,000) = 0.333 or 33.3%

In this example, the individual has a 33.3% DTI, which is considered very healthy by most financial institutions.

How to Improve Your Debt Ratio

If your results are higher than you'd like, there are two primary ways to lower the percentage:

  1. Reduce Monthly Debt: Focus on paying off high-interest credit cards or consolidating loans to lower the aggregate monthly payment.
  2. Increase Gross Income: Negotiating a raise, seeking a higher-paying position, or starting a side hustle can increase the denominator in the equation, thereby lowering the final percentage.

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