Debt to Income Ratio Calculator
Find out your debt-to-income ratio and see how lenders view your finances. Enter your income and monthly debts to get your DTI percentage, lender rating, and how much additional mortgage you could qualify for.
What Is Debt-to-Income Ratio?
Your debt-to-income (DTI) ratio measures how much of your gross monthly income goes toward paying debts. It is one of the most important numbers lenders look at when you apply for a mortgage, car loan, or personal loan. A lower DTI signals that you have a healthy balance between debt and income, making you a less risky borrower.
To calculate DTI, divide your total monthly debt payments by your gross monthly income, then multiply by 100. For example, if you earn $5,000 per month and pay $1,500 in debts, your DTI is 30%.
DTI Formula
DTI Ratio = (Total Monthly Debts ÷ Gross Monthly Income) × 100
Available Budget = (Gross Income × 0.36) − Current Debts
Max Mortgage Payment = Available Budget at 36% Threshold
Why DTI Matters for Mortgages
Lenders use your DTI ratio as a key qualification metric. Conventional mortgage lenders typically require a DTI of 36% or less, though some allow up to 43%. Government-backed loans like FHA may accept higher ratios with compensating factors. Your DTI directly determines the maximum loan amount you can qualify for, so understanding and improving it before applying can save you thousands.
How to Calculate Your DTI
Add up all your recurring monthly debt payments: rent or mortgage, car payments, student loans, credit card minimums, personal loans, child support, and any other obligatory payments. Divide that total by your gross monthly income (before taxes). Do not include expenses like utilities, groceries, or insurance premiums, as these are not considered debts by lenders.
What Is a Good DTI Ratio?
A DTI below 20% is excellent and gives you the best loan terms. Between 20% and 35% is considered good by most lenders. A DTI of 36% to 43% is acceptable but may limit your options. Above 43%, most conventional lenders will decline your application, and above 50% is considered very high risk. The lower your DTI, the more borrowing power you have.
How to Lower Your DTI
The two levers for improving DTI are reducing debt and increasing income. Pay off small balances to eliminate monthly obligations. Avoid taking on new debt before applying for a mortgage. Consider refinancing high-interest loans to lower monthly payments. On the income side, a raise, side income, or adding a co-borrower can all bring your ratio down. Even a 2-3% improvement in DTI can unlock better loan terms.
Frequently Asked Questions
What is a debt-to-income ratio?
Your debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes toward paying monthly debts. Lenders use it to evaluate your ability to manage payments and repay borrowed money.
What is a good DTI ratio for a mortgage?
Most lenders prefer a DTI of 36% or lower. Some will approve up to 43% for qualified borrowers, and FHA loans may allow up to 50% with compensating factors. Below 20% is considered excellent.
What debts are included in DTI?
DTI includes recurring monthly debt payments: mortgage or rent, car loans, student loans, credit card minimums, personal loans, child support, and alimony. It does not include utilities, groceries, insurance, or subscriptions.
How can I lower my DTI ratio?
You can lower DTI by paying off debts, avoiding new debt, increasing your income, refinancing to lower payments, or paying down credit card balances. Even small reductions can improve mortgage eligibility.
Does DTI affect my credit score?
DTI itself does not directly affect your credit score. However, the factors that contribute to a high DTI, like high credit utilization and many open accounts, can negatively impact your score.