Calculator for Debt to Income Ratio

Debt-to-Income Ratio Calculator

Monthly Debt Payments:

Your Debt-to-Income Ratio will appear here.

function calculateDTI() { var grossMonthlyIncome = parseFloat(document.getElementById('grossMonthlyIncome').value); var monthlyHousingPayment = parseFloat(document.getElementById('monthlyHousingPayment').value); var monthlyCarLoans = parseFloat(document.getElementById('monthlyCarLoans').value); var monthlyStudentLoans = parseFloat(document.getElementById('monthlyStudentLoans').value); var monthlyCreditCardMin = parseFloat(document.getElementById('monthlyCreditCardMin').value); var otherMonthlyLoans = parseFloat(document.getElementById('otherMonthlyLoans').value); // Validate inputs if (isNaN(grossMonthlyIncome) || grossMonthlyIncome < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Gross Monthly Income.'; return; } if (isNaN(monthlyHousingPayment) || monthlyHousingPayment < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Monthly Housing Payment.'; return; } if (isNaN(monthlyCarLoans) || monthlyCarLoans < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Monthly Car Loan Payments.'; return; } if (isNaN(monthlyStudentLoans) || monthlyStudentLoans < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Monthly Student Loan Payments.'; return; } if (isNaN(monthlyCreditCardMin) || monthlyCreditCardMin < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Minimum Monthly Credit Card Payments.'; return; } if (isNaN(otherMonthlyLoans) || otherMonthlyLoans < 0) { document.getElementById('dtiResult').innerHTML = 'Please enter a valid non-negative number for Other Monthly Loan Payments.'; return; } if (grossMonthlyIncome === 0) { document.getElementById('dtiResult').innerHTML = 'Gross Monthly Income cannot be zero.'; return; } var totalMonthlyDebtPayments = monthlyHousingPayment + monthlyCarLoans + monthlyStudentLoans + monthlyCreditCardMin + otherMonthlyLoans; var dtiRatio = (totalMonthlyDebtPayments / grossMonthlyIncome) * 100; var resultText = 'Your Debt-to-Income Ratio is: ' + dtiRatio.toFixed(2) + '%'; if (dtiRatio <= 36) { resultText += 'This is generally considered a good DTI ratio. Lenders typically view this favorably.'; } else if (dtiRatio <= 43) { resultText += 'This is an acceptable DTI ratio. You may still qualify for loans, but it\'s on the higher side.'; } else { resultText += 'This is considered a high DTI ratio. You might find it challenging to qualify for new loans, and it\'s advisable to reduce your debt.'; } document.getElementById('dtiResult').innerHTML = resultText; }

Understanding Your Debt-to-Income Ratio (DTI)

Your Debt-to-Income Ratio (DTI) is a crucial financial metric that lenders use to assess your ability to manage monthly payments and repay debts. It's a percentage that compares your total monthly debt payments to your gross monthly income. A lower DTI indicates a lower risk to lenders, while a higher DTI suggests you might be overextended financially.

How is DTI Calculated?

The calculation is straightforward:

DTI = (Total Monthly Debt Payments / Gross Monthly Income) × 100

Let's break down what goes into each part:

• Gross Monthly Income: This is your total income before taxes, deductions, or other expenses are taken out. If you're salaried, it's your monthly salary. If you're self-employed, it's your average monthly income before business expenses.
• Total Monthly Debt Payments: This includes recurring monthly obligations such as:
  • Your monthly housing payment (mortgage principal, interest, property taxes, and homeowner's insurance, or rent).
  • Car loan payments.
  • Student loan payments.
  • Minimum credit card payments (not your total balance, just the minimum due each month).
  • Other loan payments like personal loans, boat loans, etc.

  What's typically NOT included: Utilities, groceries, insurance premiums (unless part of your mortgage escrow), taxes (unless part of your mortgage escrow), and other living expenses are generally not counted in your DTI.

Why is DTI Important?

Lenders use your DTI to determine how much additional debt you can reasonably take on. It helps them gauge your financial health and your capacity to make new loan payments on time. A favorable DTI can lead to:

• Easier approval for mortgages, car loans, and personal loans.
• Potentially better interest rates.
• More favorable loan terms.

What's a Good DTI Ratio?

While specific requirements vary by lender and loan type, here's a general guideline:

• 36% or Less: This is generally considered excellent. You have a good balance between debt and income, making you a low-risk borrower.
• 37% – 43%: This is an acceptable range. You may still qualify for most loans, but lenders might scrutinize your application more closely.
• 44% or More: This is considered a high DTI. You might find it challenging to get approved for new loans, especially mortgages, as lenders may view you as a higher risk.

How to Improve Your DTI

If your DTI is higher than you'd like, here are some strategies to improve it:

• Increase Your Income: Look for ways to boost your gross monthly income, such as a raise, a second job, or freelance work.
• Reduce Your Debt Payments:
  • Pay down existing debts, especially those with high minimum payments.
  • Avoid taking on new debt.
  • Refinance existing loans (like student loans or car loans) to lower your monthly payments (be cautious of extending loan terms too much).

Use the calculator above to quickly determine your current Debt-to-Income Ratio and gain insight into your financial standing.