Debt-to-Income Ratio Calculator
Calculate your DTI ratio to assess your financial health
What is a Debt-to-Income Ratio?
Understanding DTI:
Your debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes toward paying debts. It's a key financial health indicator used by lenders to evaluate your capacity to manage monthly payments and take on new debt.
DTI Ratio = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
For example, if your monthly debt payments total $2,000 and your gross monthly income is $6,000, your DTI ratio is 33%.
Types of DTI Ratios:
Back-End DTI
Includes all monthly debt payments divided by gross monthly income. This is what our calculator focuses on.
Front-End DTI
Only includes housing costs (mortgage or rent) divided by gross monthly income. Lenders often want this below 28%.
What's a Good DTI Ratio?
Below 36%: Generally considered good, preferred by most lenders
36-43%: Getting high, but still possible to qualify for mortgages
Above 43%: May be difficult to qualify for new loans
Above 50%: Critical level, indicates potential financial distress
What Debts to Include
- Mortgage or rent payments
- Car loans or leases
- Student loans
- Credit card minimum payments
- Personal loans
- Child support or alimony
- Other loan obligations
Note: Living expenses like utilities, insurance, food, etc., are not included in DTI calculations.
Calculate Your Debt-to-Income Ratio
Your Income
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Your Monthly Debt Payments
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Understanding and Improving Your DTI
How DTI Affects Your Financial Life
Mortgage Approval
Most mortgage lenders prefer a DTI ratio of 36% or less, though some loans (like FHA) may allow up to 43%. For conventional loans, 36% back-end DTI and 28% front-end DTI are typical thresholds.
Credit Cards and Loans
Even with a good credit score, a high DTI can cause lenders to decline applications or offer less favorable terms. Lenders want to ensure you have sufficient income to cover new debt obligations.
Rental Applications
Landlords often check DTI to assess rental applicants. Many require that rent not exceed 30% of gross monthly income, which is part of your front-end DTI.
Financial Health
A high DTI leaves little room for savings, investments, or emergency funds. It reduces financial flexibility and increases vulnerability to financial hardship if income decreases.
Strategies to Improve Your DTI
1
Increase Your Income
Ask for a raise, take on a side job, increase your working hours, or find a higher-paying position. Any income increase will improve your DTI if debt remains constant.
2
Pay Down High-Payment Debts
Focus on reducing debts with the highest monthly payments first, as these have the biggest impact on your DTI ratio. Consider using the debt avalanche or snowball method.
3
Avoid Taking on New Debt
Put a hold on new credit cards or loans while you're working to improve your DTI. Each new debt increases your ratio and can offset progress made elsewhere.
4
Refinance or Consolidate Existing Debts
Lowering interest rates or extending terms can reduce your monthly payments, improving your DTI even without reducing the principal owed.
5
Consider Downsizing
If housing costs are a significant portion of your debt, consider moving to a less expensive home to reduce your monthly payment and improve your DTI.
Frequently Asked Questions
Can my DTI be too low?
While a low DTI is generally positive, having no debt at all can sometimes make it difficult to build credit history. A modest amount of debt that you manage responsibly can help establish and improve your credit score.
How often should I calculate my DTI?
It's a good practice to recalculate your DTI whenever your income or debt obligations change significantly. At a minimum, check your DTI once a year or before applying for any major loans or mortgages.
Do lenders use gross or net income for DTI?
Most lenders use gross monthly income (before taxes and other deductions) when calculating DTI. This provides a standardized way to compare applicants, but it means your actual available income for debt payments is less than what's used in the calculation.
Are there exceptions to DTI limits for mortgages?
Yes. Some mortgage programs offer flexibility on DTI ratios for borrowers with compensating factors like excellent credit scores, substantial savings, or large down payments. For example, Fannie Mae may approve loans with DTIs up to 50% in some cases.
Should I include my spouse's income and debts in my DTI calculation?
If you're applying for a mortgage or other joint loans, lenders will typically consider both spouses' incomes and debts in the DTI calculation. For your personal financial planning, calculating both individual and joint DTI can provide helpful insights.