Understanding Your Debt-to-Income (DTI) Ratio
Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to assess your ability to manage monthly payments and repay debts. Whether you are applying for a mortgage, an auto loan, or a personal line of credit, your DTI gives financial institutions a snapshot of your financial health relative to your income.
How is DTI Calculated?
The DTI formula is straightforward but requires accuracy. It is calculated by dividing your total recurring monthly debt payments by your gross monthly income (your income before taxes). The result is expressed as a percentage.
Formula: (Total Monthly Debt / Gross Monthly Income) x 100 = DTI %
For example, if you pay $1,500 in rent, $300 for a car loan, and $200 in student loans, your total debt is $2,000. If your gross monthly income is $6,000, your DTI is ($2,000 / $6,000) x 100 = 33%.
What Should Be Included in DTI?
When using this calculator, ensure you include all recurring debt obligations:
- Housing Costs: This includes rent or mortgage principal, interest, taxes, insurance (PITI), and HOA fees.
- Installment Loans: Auto loans, student loans, and personal loans.
- Revolving Credit: Minimum monthly payments on credit cards or lines of credit (not the total balance).
- Other Obligations: Alimony, child support, or other court-ordered payments.
Note: Generally, utility bills, grocery costs, and entertainment expenses are NOT included in the DTI calculation.
Interpreting Your DTI Score
Different lenders have different thresholds, but general guidelines are:
| DTI Range |
What It Means |
| 35% or Less |
Excellent. Lenders view you as a low-risk borrower. You likely have money left over for savings. |
| 36% to 43% |
Manageable. You can likely get approved for loans, but terms might be slightly less favorable. Lenders may ask for more documentation. |
| 44% to 49% |
Risky. You may struggle to find approval for a mortgage. This indicates potential financial stress. |
| 50% or Higher |
Critical. Most lenders will deny new credit. Focus on aggressive debt repayment to lower this ratio. |
The "43% Rule" for Mortgages
For most Qualified Mortgages in the United States, 43% is the maximum DTI ratio a borrower can have to still get approved. While there are exceptions (such as FHA loans which may allow higher ratios under certain conditions), keeping your DTI below 43% is crucial if you plan to buy a home.
How to Lower Your DTI
If your calculation shows a high percentage, consider these strategies:
- Increase Income: Side hustles, overtime, or a salary negotiation increases the denominator of the equation, lowering the percentage.
- Pay Down Debt: Focus on debts with high monthly payments. Using the "Snowball" or "Avalanche" method can help reduce monthly obligations.
- Avoid New Debt: Do not open new credit cards or take out loans before a major application like a mortgage.
function calculateDTI() {
// 1. Retrieve Input Values
var grossIncomeInput = document.getElementById("grossIncome").value;
var housingInput = document.getElementById("housingCost").value;
var carInput = document.getElementById("carLoans").value;
var studentInput = document.getElementById("studentLoans").value;
var cardsInput = document.getElementById("creditCards").value;
var otherInput = document.getElementById("otherDebts").value;
// 2. Parse values to floats, defaulting to 0 if empty
var income = parseFloat(grossIncomeInput);
var housing = housingInput === "" ? 0 : parseFloat(housingInput);
var car = carInput === "" ? 0 : parseFloat(carInput);
var student = studentInput === "" ? 0 : parseFloat(studentInput);
var cards = cardsInput === "" ? 0 : parseFloat(cardsInput);
var other = otherInput === "" ? 0 : parseFloat(otherInput);
// 3. Validation
// Only Income is strictly required to be > 0 for division.
// Debts can be 0 (lucky user!).
if (isNaN(income) || income <= 0) {
alert("Please enter a valid Gross Monthly Income greater than zero.");
return;
}
// Check if debts are valid numbers (non-negative)
if (housing < 0 || car < 0 || student < 0 || cards < 0 || other < 0) {
alert("Debt values cannot be negative.");
return;
}
// 4. Calculate Total Debt
var totalDebt = housing + car + student + cards + other;
// 5. Calculate DTI Ratio
var dtiRatio = (totalDebt / income) * 100;
// 6. Round to 2 decimal places
dtiRatio = Math.round(dtiRatio * 100) / 100;
// 7. Update UI
var resultBox = document.getElementById("dtiResult");
var valueDisplay = document.getElementById("dtiValue");
var statusDisplay = document.getElementById("dtiStatus");
var explanationDisplay = document.getElementById("dtiExplanation");
resultBox.style.display = "block";
valueDisplay.innerText = dtiRatio + "%";
// 8. Determine Status Logic
var statusText = "";
var statusColor = "";
var statusBg = "";
var explanation = "";
if (dtiRatio <= 35) {
statusText = "Excellent";
statusColor = "#155724";
statusBg = "#d4edda"; // Light green
explanation = "Your debt load is very manageable relative to your income. Lenders view you favorably.";
} else if (dtiRatio <= 43) {
statusText = "Good / Manageable";
statusColor = "#856404";
statusBg = "#fff3cd"; // Light yellow
explanation = "You are within the acceptable range for most mortgages, though you are approaching the limit.";
} else if (dtiRatio <= 49) {
statusText = "Risky";
statusColor = "#856404"; // Darker yellow/orange
statusBg = "#ffeeba";
explanation = "Your debt is high relative to your income. You may face difficulties getting approved for new credit.";
} else {
statusText = "Critical";
statusColor = "#721c24";
statusBg = "#f8d7da"; // Light red
explanation = "Your debt payments consume more than half your income. It is highly recommended to reduce debt before applying for loans.";
}
statusDisplay.innerText = statusText;
statusDisplay.style.color = statusColor;
statusDisplay.style.backgroundColor = statusBg;
explanationDisplay.innerText = explanation;
// Scroll to result for better UX on mobile
resultBox.scrollIntoView({behavior: "smooth"});
}