1. What is Debt to Income Ratio?

The Debt to Income (DTI) ratio is a personal finance measure that compares an individual's debt payments to their overall 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 two standard DTI formulas:

Where:

• Housing Costs — Monthly mortgage payment, property taxes, insurance, HOA fees
• Total Debt — All monthly debt obligations including housing costs, credit cards, car loans, student loans, etc.
• Income — Gross monthly income before taxes

3. Importance of DTI Calculation

Details: Lenders typically prefer a front-end DTI of ≤28% and back-end DTI of ≤36%. Higher ratios may make it harder to qualify for loans or result in higher interest rates.

4. Using the Calculator

Tips: Enter all amounts as monthly figures. Include all housing-related expenses for front-end DTI and all debt payments for back-end DTI.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DTI ratio for mortgage approval?
A: Conventional loans typically require ≤36% back-end DTI, though some lenders may accept up to 43% with strong compensating factors.

Q2: Does DTI include taxes and insurance?
A: Yes, front-end DTI should include property taxes, homeowners insurance, and any HOA fees in addition to the mortgage payment.

Q3: Should I use gross or net income for DTI?
A: Lenders use gross income (before taxes) for DTI calculations.

Q4: How can I improve my DTI ratio?
A: Either increase your income or reduce your debt obligations (pay down balances or refinance to lower payments).

Q5: Does DTI affect credit score?
A: No, DTI doesn't directly affect credit scores, but lenders consider both when evaluating loan applications.