1. What is Debt-to-Income 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 use DTI to evaluate a borrower's ability to manage monthly payments and repay debts.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• Monthly Mortgage — Your monthly mortgage payment amount
• Other Debt — Sum of all other monthly debt payments (car loans, credit cards, etc.)
• Monthly Income — Your gross (pre-tax) monthly income from all sources

Explanation: The ratio shows what percentage of your income goes toward debt payments each month.

3. Importance of DTI Calculation

Details: Most lenders prefer a DTI ratio of 36% or less, with no more than 28% of that debt going toward servicing your mortgage. Higher ratios may make it harder to qualify for loans.

4. Using the Calculator

Tips: Enter all amounts in dollars. Include all recurring monthly debt obligations (minimum credit card payments, auto loans, student loans, etc.) in the Other Debt field.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 36% or lower is excellent, 36-43% is acceptable but may limit options, and above 43% may disqualify you from many mortgages.

Q2: Does DTI include taxes and insurance?
A: For mortgage calculations, your monthly payment should include principal, interest, taxes, and insurance (PITI).

Q3: What income is counted in DTI?
A: Lenders typically consider all verifiable, stable income including wages, salaries, bonuses, commissions, and some government benefits.

Q4: How can I improve my DTI ratio?
A: You can either increase your income, pay down existing debts, or avoid taking on new debt.

Q5: Do all lenders use the same DTI standards?
A: Standards vary by lender and loan type. Government-backed loans may allow higher ratios than conventional loans.