1. What is Debt-To-Income Ratio?

The Debt-To-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. Lenders use DTI to evaluate a borrower's ability to manage monthly payments and repay debts.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• Total Monthly Debt — Sum of all monthly debt obligations (mortgage, car loans, credit cards, etc.)
• Monthly Income — Gross monthly income before taxes

Explanation: The ratio is expressed as a percentage that shows how much of a person's monthly income goes toward debt payments.

3. Importance of DTI Ratio

Details: Lenders typically prefer a DTI ratio below 36%, with no more than 28% of that debt going toward mortgage payments. Higher ratios may make it harder to qualify for loans.

4. Using the Calculator

Tips: Enter all monthly debt payments and your gross monthly income. Include all recurring debt obligations (minimum payments for credit cards, auto loans, student loans, etc.).

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio for mortgage approval?
A: Most lenders prefer DTI below 43% for qualified mortgages, with ideal ratios below 36%.

Q2: Does DTI include utilities and living expenses?
A: No, only recurring debt obligations. Living expenses like utilities, groceries aren't included.

Q3: How can I improve my DTI ratio?
A: Either increase your income or reduce your monthly debt payments by paying down balances.

Q4: Is front-end or back-end DTI more important?
A: Lenders look at both. Front-end considers only housing costs, while back-end includes all debts.

Q5: Does DTI affect credit score?
A: No, but the debt amounts used in DTI calculations may affect credit utilization which impacts scores.