A debt-to-income (DTI) ratio calculator helps you determine the percentage of your gross monthly income that goes toward paying debts. By entering your monthly income and all debt payments, you can instantly calculate your DTI ratio, which lenders use to assess creditworthiness. This tool is essential for understanding your financial health and loan eligibility.
The DTI ratio is calculated using the formula:
DTI Ratio = (Total Monthly Debt Payments / Gross Monthly Income) × 100
Where:
A debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes toward paying debts.
DTI includes mortgage/rent, car loans, student loans, credit card minimums, and personal loan payments.
Front-end DTI includes only housing costs, while back-end DTI includes all debt payments.
Most lenders prefer a back-end DTI of 43% or less, with some allowing up to 50% for qualified borrowers.
You can improve DTI by paying down debts, increasing income, or both.
DTI doesn't directly affect credit scores, but high DTI often correlates with credit problems.
DTI is most critical for mortgages and auto loans, but some personal lenders also consider it.
Utilities are typically not included in DTI, but some lenders may consider them for housing ratios.
Calculate DTI monthly to track progress, especially when planning major purchases or debt repayment.
It's possible but challenging. You may need higher credit scores, larger down payments, or co-signers.