Your Debt-to-Income (DTI) ratio is one of the most critical metrics lenders use to assess your creditworthiness. Unlike your credit score, which tracks your payment history, your DTI measures your ability to manage monthly payments and repay debts.
The Formula:
DTI = (Total Monthly Debt Payments / Gross Monthly Income) x 100
Why DTI Matters for Mortgages
When applying for a mortgage, lenders generally look for a DTI ratio of 36% or less, though some loan programs (like FHA loans) allow ratios up to 43% or even 50% with compensating factors. A lower DTI indicates that you have a good balance between debt and income.
DTI Ratio Tiers
Under 36%: Excellent. Most lenders view this as a healthy balance. You likely have disposable income.
36% – 43%: Manageable, but lenders may scrutinize your application more closely. You may qualify for most mortgages but potentially at higher interest rates.
43% – 50%: High Risk. You may struggle to find a qualified mortgage lender. FHA loans might be your best option.
Over 50%: Critical. Lenders view this as very high risk. It is recommended to pay down debt or increase income before applying for new credit.
Front-End vs. Back-End DTI
There are technically two types of DTI ratios:
Front-End Ratio: This only calculates your housing expenses (mortgage, insurance, property tax) divided by gross income. Ideally, this should be under 28%.
Back-End Ratio: This is what our calculator above computes. It includes housing expenses plus all other recurring debt payments (credit cards, student loans, car notes).
How to Lower Your DTI
If your ratio is higher than desired, consider these strategies:
Snowball Method: Focus on paying off small debts completely to remove those monthly payments from the calculation.
Increase Income: Taking on freelance work or asking for a raise increases the denominator in the equation, lowering the percentage.
Refinance: Refinancing high-interest loans to lower monthly payments can immediately improve your DTI, even if the total debt amount remains similar.
function calculateDTI() {
// 1. Get Income Values
var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0;
var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0;
// 2. Get Debt Values
var rentPayment = parseFloat(document.getElementById('rentPayment').value) || 0;
var carPayment = parseFloat(document.getElementById('carPayment').value) || 0;
var studentLoans = parseFloat(document.getElementById('studentLoans').value) || 0;
var creditCards = parseFloat(document.getElementById('creditCards').value) || 0;
var otherDebt = parseFloat(document.getElementById('otherDebt').value) || 0;
// 3. Validation
if (annualIncome === 0 && otherIncome === 0) {
alert("Please enter a valid income amount.");
return;
}
// 4. Calculations
var monthlyGrossIncome = (annualIncome / 12) + otherIncome;
var totalMonthlyDebt = rentPayment + carPayment + studentLoans + creditCards + otherDebt;
var dtiRatio = (totalMonthlyDebt / monthlyGrossIncome) * 100;
// 5. Update UI Results
document.getElementById('totalIncomeDisplay').innerText = "$" + monthlyGrossIncome.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalDebtDisplay').innerText = "$" + totalMonthlyDebt.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var dtiElement = document.getElementById('dtiResult');
dtiElement.innerText = dtiRatio.toFixed(2) + "%";
// 6. Determine Status and Styling
var statusElement = document.getElementById('dtiStatus');
var feedbackElement = document.getElementById('feedback-text');
var statusHtml = "";
var feedbackText = "";
var statusColor = "";
if (dtiRatio < 36) {
statusHtml = "Excellent";
statusColor = "#27ae60";
feedbackText = "Great job! Your debt load is well-balanced relative to your income. Lenders view you as a low-risk borrower.";
} else if (dtiRatio >= 36 && dtiRatio <= 43) {
statusHtml = "Good / Manageable";
statusColor = "#f39c12";
feedbackText = "You are within the acceptable range for most mortgage lenders, though you are approaching the upper limits.";
} else if (dtiRatio > 43 && dtiRatio <= 50) {
statusHtml = "High Risk";
statusColor = "#e67e22";
feedbackText = "Your DTI is higher than the standard 43% cutoff for qualified mortgages. You may need FHA financing or to pay down debt.";
} else {
statusHtml = "Critical";
statusColor = "#c0392b";
feedbackText = "Your debt payments consume more than half your gross income. It is highly recommended to reduce debt before applying for new loans.";
}
statusElement.innerHTML = statusHtml;
dtiElement.style.color = statusColor;
feedbackElement.innerText = feedbackText;
// Show result area
document.getElementById('result-area').style.display = 'block';
}