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. It's expressed as a percentage and is used by lenders to assess a borrower's ability to manage monthly payments.

2. How Does the Calculator Work?

The calculator uses the DTI ratio 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 shows what percentage of your income goes toward debt payments each month.

3. Importance of DTI Ratio

Details: Lenders use DTI to evaluate creditworthiness. Generally, a DTI below 36% is good, 36-43% may limit loan options, and above 43% may disqualify you for many loans.

4. Using the Calculator

Tips: Include all recurring monthly debts (mortgage/rent, car payments, student loans, minimum credit card payments, etc.). Use gross income (before taxes).

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good DTI ratio?
A: Below 36% is ideal, with no more than 28% going toward housing expenses. Above 43% is generally considered high risk.

Q2: Does rent count in DTI?
A: Yes, rent or mortgage payments are included in your monthly debt obligations when calculating DTI.

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

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

Q5: Do utilities count toward DTI?
A: No, only recurring debt payments are included in DTI calculations.