1. What Is Debt To Income Ratio?

The Debt-to-Income (DTI) ratio measures the percentage of your gross monthly income that goes toward paying your monthly debt obligations. It's a key metric lenders use to evaluate your ability to manage monthly payments and repay debts.

2. How Is DTI Calculated?

The calculator uses the standard DTI formula:

Where:

• Total Monthly Debt Payments — Sum of all monthly debt obligations (mortgage, car loans, credit cards, etc.)
• Gross Monthly Income — Total pre-tax income per month

Explanation: The equation shows what percentage of your income is dedicated to debt repayment each month.

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. A DTI above 43% may make it difficult to qualify for loans.

4. Using The Calculator

Tips: Include all monthly debt payments (mortgage/rent, auto loans, student loans, credit cards, etc.) and your total gross (pre-tax) monthly income from all sources.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DTI ratio?
A: Generally, 36% or lower is excellent, 36-43% is acceptable, and above 43% may limit borrowing options.

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

Q3: What's the difference between front-end and back-end DTI?
A: Front-end DTI only includes housing costs, while back-end DTI includes all debt obligations.

Q4: How can I improve my DTI ratio?
A: You can either increase your income or reduce your monthly debt payments (pay down balances, refinance at lower rates, etc.).

Q5: Do utilities count toward DTI?
A: No, regular living expenses like utilities, groceries, and insurance are not included in DTI calculations.