What is a good DTI ratio?

Lenders generally prefer a DTI ratio below 36%. A ratio of 43% is often the highest a borrower can have and still get a qualified mortgage. The lower your DTI, the better your chances of loan approval.

What is included in DTI calculations?

DTI includes recurring monthly debts like mortgage or rent payments, car loans, student loans, personal loans, credit card minimum payments, and other legal obligations like alimony or child support. It does not typically include monthly expenses like utilities, food, or insurance.

Debt-to-Income (DTI) Ratio Calculator

Currency

Your Monthly Income

Gross Monthly Income (Before Tax)

Your Monthly Debt Payments

Mortgage or Rent Payment

Car Loan Payment

Student Loan Payment

Total Credit Card Minimum Payments

Other Loans & Obligations

Your Debt-to-Income Ratio is

0.00%

Why Your DTI is a Lender's Magic Number

Imagine your finances as a seesaw. On one side, you have your total monthly income. On the other, you have all your monthly debt payments. The Debt-to-Income (DTI) ratio is simply a measure of how balanced that seesaw is. Lenders use this "magic number" to get a quick snapshot of your financial health and to gauge how well you can handle a new loan.

A low DTI tells a lender that you have a good balance between your income and your debts, leaving plenty of room for a new loan payment. It signals that you are a low-risk borrower. A high DTI, however, raises a red flag, suggesting that you might be stretched too thin financially. Knowing your DTI before you apply for a loan puts you in a position of power, allowing you to make adjustments and improve your chances of approval.

Frequently Asked Questions

What's considered a "good" DTI ratio?

While it varies, most lenders consider a DTI ratio below 36% to be excellent. A ratio between 36% and 43% is generally acceptable, but you might face stricter terms. A DTI above 43% is considered risky, making it difficult to get approved for new loans, especially a qualified mortgage.

What's the difference between Front-End and Back-End DTI?

Front-End DTI only considers your housing-related expenses (like mortgage or rent) against your income. Back-End DTI, which is what this calculator computes, includes ALL your monthly debt payments (housing, car loans, credit cards, etc.). Lenders almost always focus on your Back-End DTI as it gives a complete picture of your financial obligations.

How can I lower my DTI ratio?

There are two primary ways to lower your DTI: increase your income or decrease your debt. For decreasing debt, focus on paying down loans, especially those with high interest or small balances (for quick wins). Avoid taking on new debt before applying for a major loan. For increasing income, consider a side hustle, negotiating a raise, or other income-generating opportunities.