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 helps lenders evaluate a borrower's ability to manage monthly payments.

2. How DTI is Calculated

The calculator uses the standard DTI formula:

Where:

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

3. Why DTI Matters

Details: Lenders use DTI to assess creditworthiness. Lower DTI ratios indicate better financial health. Generally:

• DTI < 36% — Ideal for most lenders
• 36% ≤ DTI ≤ 43% — Acceptable but may limit loan options
• DTI > 43% — May have difficulty obtaining credit

4. Using the Calculator

Tips: Enter your total monthly debt payments and gross monthly income in dollars. Both values must be positive numbers (income must be greater than 0).

5. Frequently Asked Questions (FAQ)

Q1: What debts should be included?
A: Include all recurring monthly debts - mortgage/rent, car payments, credit card minimums, student loans, personal loans, etc.

Q2: What income should be included?
A: Include all pre-tax income - wages, salaries, tips, bonuses, alimony, investment income, etc.

Q3: How can I improve my DTI ratio?
A: Either increase your income, pay down debts, or do both. Refinancing high-interest debts can also help.

Q4: Is DTI the same as credit utilization?
A: No. Credit utilization compares credit card balances to credit limits, while DTI compares debt payments to income.

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