Debt-to-Income Ratio Calculator

Instantly calculate your debt-to-income ratio to assess your financial health and borrowing capacity. Essential for loan applications and financial planning.

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Enter your financial details and click "Calculate" to see your debt-to-income ratio and financial health assessment.

What is Debt-to-Income Ratio?

Your debt-to-income (DTI) ratio is a personal finance measure that compares your monthly debt payments to your monthly gross income. Lenders use this ratio to evaluate your ability to manage monthly payments and repay debts.

Formula: DTI Ratio = (Total Monthly Debt Payments / Gross Monthly Income) × 100

A lower DTI ratio demonstrates a healthy balance between debt and income. Most lenders prefer a DTI ratio below 36%, with no more than 28% of that debt going towards servicing your mortgage.

Why Your DTI Ratio Matters

  • Loan Approvals: Lenders use DTI to determine if you can afford to take on additional debt.
  • Interest Rates: A lower DTI often qualifies you for better interest rates.
  • Financial Health: Helps you understand if your debt load is manageable.
  • Budgeting: Identifies opportunities to reduce debt and improve savings.
  • Future Planning: Essential for major financial decisions like buying a home.

DTI Ratio Categories

0% - 35%

Low Risk

Your debt is manageable. Lenders view you as a low-risk borrower.

36% - 49%

Moderate Risk

Consider reducing debt. Some lenders may still approve loans.

50%+

High Risk

Your debt is excessive. Focus on debt reduction immediately.

How to Improve Your DTI Ratio

  1. Increase your income: Seek raises, promotions, or side gigs.
  2. Pay down existing debt: Focus on high-interest debts first.
  3. Avoid new debt: Pause taking on new loans or credit cards.
  4. Extend loan terms: Lower monthly payments by extending repayment periods.
  5. Downsize expenses: Reduce housing or transportation costs if possible.

Frequently Asked Questions

What debts are included in DTI ratio?

DTI includes all monthly debt obligations: mortgage/rent, auto loans, student loans, credit card payments, personal loans, alimony, and child support.

What income is considered for DTI?

Lenders consider gross income (before taxes) from employment, self-employment, retirement, investments, alimony, and government assistance.

Is rent included in DTI ratio?

Yes, your monthly rent payment is included in your debt calculations if you don't own a home. For homeowners, mortgage payments are included.

What DTI ratio do lenders prefer?

Most lenders prefer a DTI below 36%, with mortgage lenders typically requiring a DTI under 43%. Lower ratios qualify for better interest rates.

© 2023 Debt-to-Income Ratio Calculator. This tool provides estimates only. Consult a financial advisor for personalized advice.