Debt-to-Income (DTI) Ratio Calculator
Calculate your debt-to-income (DTI) ratio, a key metric that lenders use to assess your ability to take on new debt for a mortgage or loan. Understand your financial health and improve your chances of loan approval.
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More Information
Understanding the Debt-to-Income (DTI) Ratio Calculator
Your Debt-to-Income (DTI) ratio is a critical financial metric that compares your total monthly debt payments to your gross monthly income. Lenders use it as a primary indicator of your ability to manage new debt, making it a crucial factor when you apply for a mortgage, auto loan, or personal loan.
How to Calculate DTI
The formula is straightforward:
DTI = (Total Monthly Debt Payments / Gross Monthly Income) * 100
- Total Monthly Debt Payments: Sum up all your recurring debt payments. This includes rent or mortgage, car payments, student loans, credit card minimum payments, alimony, or any other loans. It does NOT include general expenses like utilities, groceries, or insurance.
- Gross Monthly Income: This is your total income per month *before* any taxes or deductions are taken out.
Why DTI Matters to Lenders
Lenders use DTI to assess risk. A lower DTI suggests a good balance between debt and income, indicating you can comfortably handle new payments. A high DTI suggests you may be overextended financially. Generally, for a mortgage, lenders look for a DTI of 43% or less, with ratios below 36% being considered ideal.