Your Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payment to their monthly gross income. It is one of the primary metrics lenders use to determine your ability to manage monthly payments and repay debts.
Simply put, it tells lenders how much of your income is already spoken for by debts like housing, cars, and credit cards. A lower DTI ratio suggests that you have a good balance between debt and income, making you a more attractive candidate for loans and mortgages.
How the DTI Formula Works
The calculation is straightforward but requires accuracy regarding your monthly obligations. The formula is:
Rent or Mortgage payments (including taxes and insurance)
Auto loans
Student loans
Minimum credit card payments
Alimony or child support
Note that expenses like groceries, utilities, and entertainment are not included in this calculation.
Understanding Your DTI Score
Different lenders have different criteria, but generally, DTI ratios fall into these categories:
35% or less: Considered excellent. You have manageable debt relative to your income. Lenders view you as a low-risk borrower.
36% to 49%: Considered adequate, but you may have trouble qualifying for the best interest rates. Lenders may ask for additional proof of financial stability.
50% or higher: Considered high risk. You may have limited borrowing options and should focus on paying down debt before taking on new loans.
Why Does DTI Matter?
Whether you are applying for a mortgage, a car loan, or a personal line of credit, your DTI is a gatekeeper. Even if you have a high credit score, a high DTI can result in a loan denial because it indicates you may not have enough cash flow to handle another monthly payment.
Strategies to Lower Your DTI
If your ratio is higher than you'd like, consider these steps:
Increase Income: Look for side hustles, overtime, or a higher-paying job to increase the denominator of the equation.
Snowball Debt: Focus on paying off small debts completely to remove those monthly payments from the calculation.
Avoid New Debt: Put a freeze on large purchases until your ratio improves.
function calculateDTI() {
// Get input values
var income = parseFloat(document.getElementById('monthlyIncome').value);
var rent = parseFloat(document.getElementById('rentMortgage').value) || 0;
var car = parseFloat(document.getElementById('carLoan').value) || 0;
var student = parseFloat(document.getElementById('studentLoan').value) || 0;
var cc = parseFloat(document.getElementById('creditCards').value) || 0;
var other = parseFloat(document.getElementById('otherDebt').value) || 0;
// Validation
if (!income || income <= 0) {
alert("Please enter a valid Gross Monthly Income.");
return;
}
// Calculation
var totalDebt = rent + car + student + cc + other;
var dtiRatio = (totalDebt / income) * 100;
// Display Results
document.getElementById('totalDebtDisplay').innerText = "$" + totalDebt.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('dtiResult').innerText = dtiRatio.toFixed(2) + "%";
// Status Logic
var statusDiv = document.getElementById('dtiStatus');
var explanationP = document.getElementById('dtiExplanation');
var badge = "";
var explanation = "";
if (dtiRatio <= 35) {
badge = 'Excellent Health';
explanation = "Your debt load is very manageable. Lenders will view you favorably.";
} else if (dtiRatio > 35 && dtiRatio < 50) {
badge = 'Manageable Risk';
explanation = "Your debt is relatively high. You may still qualify for loans, but watch your spending.";
} else {
badge = 'High Risk';
explanation = "Your debt-to-income ratio is critical. Focus on paying down debt immediately.";
}
statusDiv.innerHTML = badge;
explanationP.innerText = explanation;
// Show results section
document.getElementById('results').style.display = 'block';
}