Debt-to-Income (DTI) Ratio Calculator
Your Debt-to-Income Ratios
Your debt-to-income ratio indicates your financial health.
About Your Results
This is an estimate of your debt-to-income ratios. These calculations are for informational purposes only.
This calculator provides estimates only. Actual loan eligibility depends on additional factors including credit score, employment history, and lender-specific criteria. Consult with a financial advisor for personalized advice.
What is Debt-to-Income (DTI) Ratio?
Debt-to-Income (DTI) Ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. Your DTI ratio is expressed as a percentage and lenders use it to assess your ability to manage monthly payments and repay debts.
There are two types of DTI ratios that lenders typically consider:
- Front-End Ratio: Also known as the housing ratio, this includes all your monthly housing expenses (mortgage or rent, property taxes, homeowners insurance, and HOA fees) divided by your gross monthly income.
- Back-End Ratio: This includes all your monthly debt obligations (housing payments plus other debts like car loans, credit cards, student loans, and personal loans) divided by your gross monthly income.
How This DTI Calculator Works
This calculator determines both your front-end and back-end DTI ratios using standard financial formulas. These calculations help you understand your debt burden relative to your income.
The DTI Formulas
Front-End Ratio = (Monthly Housing Expenses / Gross Monthly Income) × 100
Back-End Ratio = (Total Monthly Debt Payments / Gross Monthly Income) × 100
Where:
• Monthly Housing Expenses: Your total monthly housing costs including mortgage/rent, property taxes, homeowners insurance, and HOA fees.
• Total Monthly Debt Payments: All your monthly debt obligations including housing expenses, credit card payments, car loans, student loans, and other personal loans.
• Gross Monthly Income: Your total income before taxes and other deductions.
Example Calculation
Let's calculate DTI ratios for someone with:
- Gross Monthly Income: $5,000
- Monthly Housing Payment: $1,200
- Other Monthly Debt Payments: $800
Front-End Ratio: ($1,200 / $5,000) × 100 = 24%
Back-End Ratio: (($1,200 + $800) / $5,000) × 100 = 40%
DTI Ratio Standards and Interpretation
Lenders use DTI ratios to evaluate loan applications, particularly for mortgages. Generally, lower DTI ratios indicate better financial health and lower risk for lenders.
| DTI Ratio Range | Interpretation | Lender Perspective |
|---|---|---|
| Below 28% | Excellent | Ideal candidate for loans |
| 28% - 36% | Good | Generally acceptable for most loans |
| 36% - 43% | Fair | May face stricter scrutiny |
| Above 43% | Poor | May struggle to qualify for new credit |
Note: For conventional mortgages, most lenders prefer a front-end ratio of 28% or less and a back-end ratio of 36% or less, though some programs may allow higher ratios with compensating factors.
DTI Calculator FAQs
Generally, a DTI ratio of 36% or less is considered good by most lenders. For mortgage applications specifically, many lenders prefer to see a front-end ratio (housing expenses) of 28% or less and a back-end ratio (total debts) of 36% or less. However, some loan programs may accept higher ratios with strong compensating factors like excellent credit or significant cash reserves.
Your DTI ratio includes all monthly debt obligations that appear on your credit report plus your housing payment. This typically includes:
- Mortgage or rent payment
- Auto loans
- Student loans
- Credit card payments (minimum payments)
- Personal loans
- Other installment debts
Utilities, insurance premiums, and other monthly expenses that don't involve debt repayment are generally not included.
You can improve your DTI ratio by either increasing your income or decreasing your debt. Specific strategies include:
- Paying down existing debts to reduce monthly payments
- Avoiding taking on new debt
- Increasing your income through raises, promotions, or side jobs
- Refinancing existing debts to lower monthly payments
- Consolidating multiple debts into one with a lower payment
Both DTI ratio and credit score are critically important for loan applications, but they measure different aspects of your financial health. Your credit score reflects your history of repaying debts, while your DTI ratio shows your current debt burden relative to your income. Lenders consider both factors when evaluating loan applications. A high credit score may sometimes compensate for a slightly higher DTI ratio, and vice versa.