Debt-to-Income (DTI) Calculator
Calculate your DTI ratio to understand your borrowing capacity and loan eligibility
DTI Ratio Formulas
Understanding Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is a personal finance metric that compares your monthly debt payments to your gross monthly income. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money. It's one of the most important factors in loan approval decisions.
There are two types of DTI ratios: front-end (housing ratio) and back-end (total debt ratio). The front-end ratio considers only housing costs, while the back-end ratio includes all debt obligations. Most lenders focus primarily on the back-end ratio for approval decisions.
A lower DTI ratio indicates better financial health and suggests you have sufficient income to handle additional debt. High DTI ratios signal that you're stretched thin and may struggle with new debt obligations.
DTI Components Explained
Housing Costs
Mortgage principal, interest, taxes, insurance (PITI), HOA fees, or rental payment.
Auto Loans
All car payments and auto lease payments count toward total debt.
Credit Cards
Monthly minimum payments on all credit cards, not the total balance.
Student Loans
Current monthly payment (or IBR payment) for all student loans.
DTI Requirements by Loan Type
Different loan types have different DTI requirements. Meeting these thresholds is crucial for loan approval.
| Loan Type | Max Front-End | Max Back-End | Notes |
|---|---|---|---|
| Conventional Mortgage | 28% | 36-43% | 45-50% with compensating factors |
| FHA Loan | 31% | 43% | Up to 57% with strong credit |
| VA Loan | N/A | 41% | No hard limit, residual income matters |
| USDA Loan | 29% | 41% | Rural property required |
| Jumbo Loan | 28% | 36-43% | Stricter requirements |
| Personal Loan | N/A | 35-40% | Varies by lender |
| Auto Loan | N/A | 15-20% | For auto payment alone |
Strategies to Improve Your DTI
Increase Income
Ask for a raise, take on a side job, or add a co-borrower. More income directly lowers your DTI percentage.
Pay Down Debt
Focus on paying off or paying down debts with monthly payments. Even reducing balances lowers minimum payments.
Refinance Existing Debt
Extend loan terms to lower monthly payments. While you'll pay more interest, your DTI improves for approval.
Avoid New Debt
Don't open new credit cards or finance purchases before applying for a loan. Each new payment increases DTI.
Frequently Asked Questions
What's a good debt-to-income ratio?
Generally, 36% or lower is considered good. Under 20% is excellent. 37-43% may limit options but is still acceptable. Above 43% makes most conventional loans difficult to obtain.
Does rent count toward DTI?
Yes, when you're applying for a mortgage while renting, your current rent payment counts toward DTI. However, once you own a home, the new mortgage payment replaces rent in the calculation.
Are utilities included in DTI?
No. Utilities, groceries, insurance (except home/renter's insurance bundled with housing), and other living expenses don't count. DTI only includes actual debt obligations with fixed payments.
How do lenders calculate my income?
Lenders typically use gross monthly income (before taxes). For salaried employees, it's annual salary divided by 12. Self-employed borrowers usually average two years of tax returns. Variable income may be averaged over 24 months.
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