Debt-to-Income (DTI) Ratio Calculator
Determine your creditworthiness and mortgage eligibility by calculating your monthly DTI ratio.
Your Debt-to-Income Ratio
What is a Debt-to-Income (DTI) Ratio?
The Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. Lenders, especially mortgage providers, use this percentage to determine your ability to manage monthly payments and repay borrowed money.
How to Calculate DTI Ratio
The formula for DTI is straightforward:
Gross monthly income refers to your total earnings before taxes and other deductions. Monthly debt includes recurring obligations like housing costs, car notes, student loans, and minimum credit card payments. It usually does not include expenses like groceries, utilities, or insurance.
Understanding Your Results
- 35% or Less (Ideal): Most lenders view this as a healthy level of debt. You likely have sufficient disposable income.
- 36% to 43% (Moderate): You are reaching the upper limit for many conventional mortgage lenders. This is often considered the "manageable" zone.
- 44% to 50% (High): You may find it difficult to qualify for new credit. Specialized loans (like FHA) might still be accessible, but with stricter terms.
- Over 50% (Critical): Your debt consumes half your income. Financial flexibility is severely limited.
Real-World DTI Example
Scenario: Sarah earns $6,000 per month (Gross).
- Rent: $1,800
- Car Payment: $400
- Student Loan: $300
- Credit Card Min: $100
Calculation: Total Debt ($2,600) / Gross Income ($6,000) = 0.433
Sarah's DTI: 43.3%
How to Lower Your DTI
To improve your DTI ratio for a mortgage or loan application, you have two primary levers: increase your gross monthly income (through raises or side income) or pay down recurring monthly debts to reduce the numerator in the equation. Many experts recommend paying off high-interest credit cards first to lower your minimum monthly obligation.