💰 Debt to Income Ratio Calculator
Calculate your DTI ratio to see if you qualify for a mortgage or other loans. Lenders use this to assess your ability to manage debt.
Why Use This Calculator?
Mortgage Approval Threshold Understanding
43% DTI = typical maximum for mortgage approval (Qualified Mortgage rule). $6,000 monthly income: 43% = $2,580 max debt payments. $2,800 payments = 47% DTI = likely denied. Knowing your 43% limit = $2,580 helps target debt payoff before home shopping.
Loan Rate Impact Calculation
36% DTI = prime rate (lowest), 43% DTI = standard rate (+0.5%), 50% DTI = subprime (+2-3%). $300k mortgage: 6.5% vs 8.5% = $380/month difference ($137k over 30 years). Lowering DTI 36% to 43% saves six figures in interest.
Maximum Affordable Home Price
$8,000 monthly income, 36% DTI = $2,880 max debts. Current debts $800 = $2,080 available for mortgage. $2,080/month = $380k home at 7% (30yr). 43% DTI = $3,440 - $800 = $2,640 mortgage = $480k home. DTI difference = $100k buying power.
Credit Card Approval Likelihood
Under 36% DTI = premium card approval (95% chance). 36-43% = standard approval (70%). 43-50% = high-risk only (40%). Over 50% = denials (10% approval). Calculator shows if DTI allows premium card approval or needs reduction first.
Auto Loan Qualification Ceiling
Auto lenders prefer 15-20% DTI for vehicle debts specifically. $5,000 income: 15% = $750 max car payment = $35k vehicle. 20% = $1,000 payment = $45k vehicle. Calculator shows affordable car payment based on income and existing debts.
Financial Stress Level Indicator
Under 20% DTI = comfortable, surplus for savings. 20-36% = manageable, tight budget. 36-43% = stressful, little flexibility. Over 43% = severe stress, one emergency from crisis. DTI serves as financial health barometer beyond just loan approval.
Step-by-Step Guide
Calculate Gross Monthly Income
Include ALL income before taxes. Salary ($60k/year = $5,000/month), bonuses (average over 2 years), commission, rental income, alimony, child support. $60k salary + $6k annual bonus = $66k ÷ 12 = $5,500/month. Use gross not net income for DTI.
Example:
Example: $60k salary + $6k bonus = $5,500 monthly gross income
List All Monthly Debt Payments
Include minimum payments on: Credit cards ($250), auto loan ($420), student loans ($300), personal loans ($150), other installment debts. EXCLUDE: Utilities, groceries, insurance (non-debt expenses). Only recurring debt obligations count. Total: $1,120/month debt payments.
Example:
Example: $250 CC + $420 car + $300 student = $970 debt payments
Include Proposed Mortgage Payment
When calculating for home purchase, add estimated mortgage payment. $350k home, $70k down, $280k loan at 7% = $1,863/month (PITI - principal, interest, taxes, insurance). Include full PITI not just principal/interest. Total debts: $970 + $1,863 = $2,833.
Example:
Example: $1,863 PITI + $970 existing debts = $2,833 total
Calculate Front-End DTI (Housing Only)
Front-end = housing payment ÷ income. $1,863 mortgage ÷ $5,500 income = 33.9% front-end DTI. Lenders want under 28-31% front-end. 33.9% = slight stretch, may need more down payment or cheaper house. Front-end focuses on housing affordability specifically.
Example:
Example: $1,863 housing ÷ $5,500 income = 33.9% front-end
Calculate Back-End DTI (All Debts)
Back-end = all debts ÷ income. $2,833 total debts ÷ $5,500 income = 51.5% back-end DTI. Lenders want under 43% (50% max with compensating factors). 51.5% = likely mortgage denial. Need to pay off $470/month in debts to reach 43% threshold.
Example:
Example: $2,833 all debts ÷ $5,500 = 51.5% (too high, need <43%)
Determine Gap to 43% Threshold
Target 43% of $5,500 = $2,365 max debts. Current $2,833 - target $2,365 = $468/month over. Must eliminate $468 in monthly debt payments. Options: Pay off $8k credit card ($250/month), Pay off $10k personal loan ($218/month). Total $468 reduction reaches 43%.
Example:
Example: Need to eliminate $468/month debt to reach 43% DTI
Identify Debts to Eliminate for Target DTI
Prioritize smallest balances for quick elimination. Credit card $3k ($125/month), Personal loan $5k ($150/month), Auto $18k ($420/month). Pay off $3k + $5k = eliminate $275/month. Gets DTI from 51.5% to 46.5%. Pay off auto ($18k) = 43% DTI, approved for mortgage.
Example:
Example: Eliminate $8k debt ($275/month) improves DTI 5 points
Calculate Required Income for Target Home
Want $400k home? $80k down = $320k mortgage = $2,130 PITI. With $970 other debts = $3,100 total. At 43% DTI: Income needed = $3,100 ÷ 0.43 = $7,209/month ($86,500 annually). Current $66k income = $400k home unaffordable, target $300k instead.
Example:
Example: $400k home needs $86.5k income at 43% DTI (you have $66k)
Model Income Increase Impact on DTI
Current: $5,500 income, $2,833 debts = 51.5% DTI. Raise to $70k ($5,833/month) = $2,833 ÷ $5,833 = 48.6% DTI (still too high). Raise to $80k ($6,667/month) = 42.5% DTI (approved!). Calculator shows required income increase to reach target DTI.
Example:
Example: $70k income = 48.6% DTI, $80k = 42.5% (qualified)
Compare Debt Payoff vs Income Increase Strategies
Reach 43% DTI via: (A) Pay off $18k auto = $468/month freed, DTI 43%, 12 months aggressive payoff. (B) Increase income $66k to $80k = $14k raise, DTI 42.5%, may take 2-3 years. Calculator shows faster path is debt payoff for most people.
Example:
Example: Pay off $18k in 12 months vs waiting 2-3 years for raise
Expert Tips & Strategies
Target 36% DTI for Best Rates, Not Just 43% Approval
43% DTI = approved but standard rates. 36% DTI = prime rates, 0.5-1% lower. $300k mortgage: 7% vs 6.5% = $95/month savings ($34k over 30 years). Worth paying extra debt before mortgage to reach 36% for rate savings. Don't settle for "just approved."
Pay Off Smallest Debts First to Lower DTI Quickly
$3k credit card ($125/month) paid in 6 months vs $18k auto ($420/month) taking 18 months. Eliminate $125 quickly, then $150 personal loan = $275/month improvement in 12 months. Small debt elimination = fast DTI improvement. Snowball method perfect for DTI reduction.
Include Proposed Mortgage in DTI Before House Shopping
Don't Take New Debt 6-12 Months Before Major Purchase
Planning home purchase in 12 months? Don't finance new car now. $450 car payment = 8% DTI increase = lose $50k in home buying power. Freeze all new debt 12 months pre-mortgage. One car payment can kill mortgage approval or force smaller house.
Use Gross Income Not Net for DTI Calculation
$5,000 gross = $3,800 net (after taxes). Using net income: $2,000 debts ÷ $3,800 = 53% DTI (looks terrible). Correct: $2,000 ÷ $5,000 gross = 40% (acceptable). Lenders always use gross income. Using net income inflates DTI 25-30% incorrectly.
Side Hustle Income Needs 2-Year History for Lenders
Started Uber 6 months ago earning $1,000/month extra? Lenders won't count it (need 2-year history). DTI calculated on base $5,000 only. But paying debts with side income = lower DTI eventually. Use side income to eliminate debts, improving DTI with time.
Request Debt Payment Reduction if Over 43% Threshold
42% DTI but car payment $450? Call lender: Refinance from 4yr to 6yr term = $350 payment. Saves $100/month, drops DTI to 40%. Extends loan but gets mortgage approved. Can always pay extra later. Strategic term extension temporarily fixes high DTI.
Factor in Changing Income for Future DTI Planning
Current $70k ($5,833/month), 45% DTI. Promotion to $85k in 6 months = $7,083/month = 40% DTI (same debts). Wait 6 months for promotion before applying for mortgage. Income increase automatically improves DTI. Time major purchases after income bumps.
Common Mistakes to Avoid
✓ Better approach: $66k gross = $50k net after taxes. Using net: $2,000 debts ÷ $4,167 = 48% DTI. Correct gross: $2,000 ÷ $5,500 = 36% DTI. Using net income inflates DTI 30%+ wrongly. Lenders ALWAYS use gross income. Using net makes situation seem worse than reality.
✓ Better approach: Calculating only principal + interest ($1,250) = looks affordable. But PITI = $1,250 + $350 taxes + $120 insurance = $1,720 total. Forgetting taxes/insurance underestimates DTI 27%. Always use full PITI for accurate DTI calculation. Many fail mortgages by ignoring this.
✓ Better approach: $8k credit card, paying $500/month, but minimum only $200. Lenders use $200 minimum for DTI not your $500 actual payment. DTI = debts ÷ income uses minimums not actuals. Don't overestimate DTI by using actual payments when minimums are lower.
✓ Better approach: 42% DTI, pre-approved for mortgage. Then finance $30k car ($550/month) = 52% DTI = mortgage approval revoked. New debt between pre-approval and closing kills deals. NEVER take new debt during mortgage process. Lenders re-check credit before closing - new loan = denial.
✓ Better approach: 43% = maximum for most lenders but comes with higher rates. 43% vs 36% = 0.5-1% higher rate = $30k-50k extra interest on $300k mortgage. Settling for 43% costs tens of thousands. Target 36% for best rates. 43% is approval threshold not optimal DTI.
✓ Better approach: Forgetting $40k student loan in deferment ($0 current payment). Lenders impute 1% balance as payment: $40k × 1% ÷ 12 = $333/month counts toward DTI. $0 actual payment but $333 calculated payment. Deferred/forbearance loans still count - don't omit them from DTI.
✓ Better approach: Including $1,500/month Uber income started 3 months ago. Lenders need 2-year history for self-employment income. Won't count recent side income. Overestimating income underestimates DTI = surprise denial. Only count income lenders will actually verify and approve (W-2, 2+ year 1099).
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Frequently Asked Questions
What is debt-to-income ratio?
Debt-to-income (DTI) ratio is your total monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders use this to determine if you can afford to take on more debt.
What is a good DTI ratio?
Generally, a DTI below 36% is considered good. Most lenders prefer DTI under 43% for mortgages. Below 20% is excellent and gives you the most borrowing power and best rates.
What's the difference between front-end and back-end DTI?
Front-end DTI is just your housing costs (mortgage, insurance, taxes) divided by income. Back-end DTI includes all debts (housing + car + credit cards + loans). Lenders look at both.
How can I lower my DTI ratio?
You can lower DTI by: 1) Paying off debts, 2) Increasing your income, 3) Avoid taking on new debt, 4) Making extra payments on existing debt, or 5) Refinancing to lower payments.
Does my DTI affect my credit score?
DTI does NOT directly affect your credit score - credit bureaus don't know your income. However, lenders check it when you apply for loans. A high DTI can lead to loan denials even with good credit.