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 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, credit cards, loans, etc.)
• Monthly Income — Gross monthly income before taxes and deductions

Explanation: The ratio shows what percentage of your income goes toward debt payments each month.

3. Importance of DTI Calculation

Details: Lenders use DTI to evaluate creditworthiness. A lower DTI shows better balance between debt and income. Most lenders prefer DTI below 36%, with no more than 28% going toward housing expenses.

4. Using the Calculator

Tips: Include all monthly debt obligations (mortgage/rent, car payments, student loans, credit card minimums, etc.). Use gross income (before taxes). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 35% or lower is excellent, 36%-49% is acceptable but may limit loan options, and 50% or higher means you might struggle to get loans.

Q2: How can I improve my DTI ratio?
A: Either increase your income or reduce your debt. Paying down credit cards or consolidating loans can help lower your ratio.

Q3: Does DTI include utilities and insurance?
A: No, only debt payments (minimum payments for revolving credit). Living expenses aren't included in DTI calculations.

Q4: What's the difference between front-end and back-end DTI?
A: Front-end only includes housing costs, while back-end includes all debt obligations. Lenders typically look at back-end DTI.

Q5: Is DTI the only factor lenders consider?
A: No, lenders also consider credit score, employment history, assets, and loan-to-value ratio for mortgages.