DTI Calculator
Calculate and analyze your dti with this free online tool.
DTI Calculator
What is DTI?
Your Debt-to-Income (DTI) ratio shows what percentage of your monthly income goes to debt payments. Lenders use this to assess your ability to manage monthly payments and repay borrowed money.
Moderate Position
Good, but could improve
Income Distribution
DTI Ratio Comparison
DTI Guidelines
Understanding Debt-to-Income Ratio (DTI)
Your debt-to-income ratio (DTI) is a critical financial metric that compares your monthly debt payments to your gross monthly income, expressed as a percentage. For example, if you earn $5,000 per month and pay $1,500 toward debts, your DTI is 30%. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money—it's one of the most important factors in mortgage approval, auto loans, and credit card applications. A lower DTI indicates better financial health and borrowing capacity.
Key DTI Terms
Front-End DTI Ratio
Also called the housing ratio, this measures only housing-related expenses (mortgage, property taxes, insurance, HOA fees) divided by gross monthly income. Lenders typically want this below 28%. If you earn $6,000/month and housing costs are $1,500, your front-end DTI is 25%—well within acceptable limits.
Back-End DTI Ratio
The total DTI that includes all monthly debt obligations—housing, credit cards, auto loans, student loans, personal loans, and other recurring debts—divided by gross income. This is the primary DTI lenders evaluate. Most lenders require back-end DTI below 43%, though conventional mortgages often prefer 36% or lower.
Gross Monthly Income
Your total income before taxes and deductions. Includes salary, wages, bonuses, commissions, rental income, alimony, child support, and other verifiable recurring income. Lenders require documentation (pay stubs, tax returns, bank statements) proving consistent income for 2+ years. Self-employed income is averaged over 2 years.
Recurring Monthly Debts
Debt obligations that appear on your credit report and continue for 10+ months. Includes minimum credit card payments, auto loans, student loans, personal loans, mortgage/rent payments, and child support. Does not include utilities, groceries, insurance premiums (except housing-related), or medical bills unless they're in collections.
Qualified Mortgage (QM)
A mortgage meeting specific standards that protect borrowers from risky lending practices. Under federal Qualified Mortgage rules, your back-end DTI cannot exceed 43% for the loan to receive QM status. QM loans offer borrowers legal protections and lenders liability protection, making them the industry standard.
Compensating Factors
Positive financial attributes that may allow higher DTI ratios. Examples include large down payment (20%+), excellent credit score (740+), substantial cash reserves (6+ months), or significant increase in income. Lenders may approve DTI up to 45-50% with strong compensating factors, though rates may be higher.
How to Calculate Your DTI Ratio
Calculate Gross Monthly Income
Sum all income sources before taxes. For salary, divide annual income by 12. Include bonuses averaged over 2 years, commissions, rental income, alimony, investment income, and any other verifiable recurring income. Self-employed? Average your net business income over the past 2 years using tax returns.
Add Up All Monthly Debt Payments
List every minimum monthly payment on debts that will last 10+ months: mortgage/rent, car loans, student loans, personal loans, credit card minimum payments, timeshares, and child support. For credit cards, use the minimum payment shown on your statement, not your typical payment. Include the new mortgage payment if you're applying for a home loan.
Divide Debts by Income
Divide your total monthly debts by your gross monthly income, then multiply by 100 to get a percentage. This is your back-end DTI ratio—the number lenders care most about. Round to the nearest whole number or one decimal place.
Assess Your DTI Level
Compare your DTI to lender standards: Under 36% is excellent and qualifies for best rates. 37-42% is good and acceptable for most loans. 43-49% is fair but limits options and may require compensating factors. 50%+ is poor and makes qualifying difficult with conventional loans, though FHA may still work.
DTI Ratio Ranges & What They Mean
Excellent: 35% or Below
IDEALYou're in great financial shape with substantial borrowing power. Lenders view you as low-risk and compete for your business with the best interest rates and terms. You have significant room in your budget for additional debt if needed.
Good: 36% - 42%
ACCEPTABLEYou're still in healthy territory and qualify for most loans, though you may not get the absolute lowest rates. This range is common among homeowners with mortgages. You should be cautious about taking on additional debt and focus on paying down existing obligations.
Fair: 43% - 49%
CAUTIONYou're approaching maximum debt capacity. At 43%, you've hit the Qualified Mortgage limit, and many conventional lenders won't go higher. You may still qualify with FHA loans, strong credit (680+), or compensating factors, but expect higher rates and limited lender options. Prioritize debt reduction before taking new loans.
Poor: 50% or Above
RISKYYou're overextended and will struggle to qualify for new credit. Most of your income goes to debt payments, leaving little room for savings, emergencies, or quality of life. Conventional mortgages are nearly impossible. Focus aggressively on debt reduction before considering new loans. Financial counseling may be beneficial.
DTI Requirements by Loan Type
Conventional Mortgages
Maximum DTI: 43% (standard), up to 45-50% with exceptional credit (740+) and compensating factors
Preferred DTI: 36% or lower for best rates
Front-End Ratio: 28% maximum for housing expenses
Note: Fannie Mae and Freddie Mac (conventional loan buyers) use automated underwriting that may allow higher DTI with strong credit scores, large down payments, or substantial cash reserves. Manual underwriting is stricter at 36-43%.
FHA Loans
Maximum DTI: 43% (standard), up to 56.99% with compensating factors
Front-End Ratio: 31% preferred, up to 40% allowed
Credit Score: Minimum 580 for 3.5% down; 500-579 requires 10% down
Note: FHA is more flexible with higher DTI ratios than conventional loans, making them popular for first-time buyers or those with moderate debt. However, FHA requires mortgage insurance for the life of the loan if down payment is less than 10%.
VA Loans
Maximum DTI: 41% (guideline), but no hard cap—underwriters evaluate total financial picture
Residual Income: More important than DTI for VA loans
No Down Payment: Required with VA eligibility
Note: VA loans focus on residual income (money left after all obligations) rather than strictly enforcing DTI limits. Veterans with DTI above 41% can still qualify if residual income meets VA's regional requirements based on family size.
USDA Loans
Maximum DTI: 41% back-end, 29% front-end (preferred)
Manual Underwriting: Up to 44% may be allowed with compensating factors
Income Limits: Must meet area-specific income requirements
Note: USDA loans are for rural properties and require no down payment. DTI requirements are moderate, similar to conventional loans, but income cannot exceed 115% of area median income for the property location.
Auto Loans & Personal Loans
Maximum DTI: 40-50% depending on lender and credit score
Prime Lenders: Prefer 36% or lower DTI
Subprime Lenders: Accept up to 55-60% DTI but charge much higher rates (10-20%+)
Note: Auto and personal loan lenders have more flexibility than mortgage lenders but also charge higher rates for elevated risk. Lower DTI gets you significantly better interest rates—the difference can be 5-10 percentage points.
10 Ways to Improve Your DTI Ratio
Pay Down Existing Debt
Focus on eliminating or reducing monthly debt obligations. Prioritize high-payment debts for maximum DTI impact. Paying off a $400 car loan improves your DTI more than paying down $5,000 on a credit card with $50 minimum payment. Target debts with fewer than 10 months remaining first—these drop off DTI calculations fastest.
Increase Your Income
Ask for a raise, work overtime, take a second job, or start a side business. Any documented income increase directly improves your DTI. For mortgage applications, lenders need 2 years of history for self-employment or bonus income, but base salary increases count immediately with updated pay stubs.
Don't Take On New Debt
Avoid new credit cards, auto loans, or personal loans when planning to apply for a mortgage. Even inquiries can impact approval. Wait until after your mortgage closes to finance furniture or make other major purchases. New debt can disqualify you even after pre-approval if it appears before closing.
Consolidate or Refinance Debt
Combine multiple debts into one lower payment through consolidation loans or balance transfer cards. Refinancing auto or student loans to longer terms reduces monthly payments (though increases total interest). This lowers your DTI even if total debt remains the same. Just ensure new terms don't trap you in debt longer.
Make Lump Sum Payments
Use tax refunds, bonuses, or savings to pay off entire loan balances. Completely eliminating a debt removes it from DTI calculations immediately. Paying down balances without closing accounts doesn't help as much—lenders use minimum payments regardless of balance (for credit cards) or remaining payment count.
Get Added as an Authorized User
For income purposes, consider adding working household members as co-borrowers. Their income reduces DTI if they're on the loan application, though their debts also count. Alternatively, document rental income from boarders/roommates if you have consistent rental agreements and deposit history.
Pay Off Student Loans Aggressively
Student loans are often the biggest DTI obstacle for first-time homebuyers. Even on income-driven repayment at $0/month, lenders may use 1% of the balance as your monthly payment for DTI calculations. Paying down or paying off student loans significantly improves your mortgage-borrowing power.
Dispute Incorrect Debts
Review your credit report for errors—accounts you don't recognize, duplicate listings, or debts that should be closed. Dispute these with credit bureaus and provide documentation. Removing even one incorrect $100 monthly debt can mean qualifying for $20,000-$25,000 more mortgage.
Shop for Lower Housing Costs
When mortgage shopping, targeting homes $20,000-$30,000 less expensive significantly reduces your projected housing payment and improves DTI. Consider homes needing cosmetic work you can do yourself—sweat equity doesn't count in DTI, but mortgage payments do. Lower price = lower payment = better DTI = better rate.
Wait and Build Your Financial Profile
Sometimes the best strategy is waiting 6-12 months while aggressively paying down debt and increasing income. The difference between 45% DTI and 38% DTI can mean $50,000+ additional borrowing power and 0.5-1% lower interest rates, saving tens of thousands over the loan term. Patience pays.
Common DTI Mistakes to Avoid
Forgetting Debts in Your Calculation
Many people forget to include all debts: alimony, child support, timeshares, co-signed loans, or debts in deferment. Lenders will find all these on your credit report or tax returns. Calculate your DTI with everything included so there are no surprises during the application process. Missing debts leads to re-qualification at higher DTI with worse terms.
Using Net Income Instead of Gross
DTI uses gross income (before taxes), not take-home pay. Using net income makes your DTI appear much worse than it actually is. If you earn $5,000 gross but take home $3,800, calculate DTI with the $5,000 figure. However, remember your actual budget needs to work with take-home pay—DTI is for lender qualification, not personal budgeting.
Taking On New Debt Before Closing
Getting pre-approved doesn't mean you're safe to buy a car or finance furniture. Lenders re-check credit before closing. New debt can increase your DTI enough to disqualify you, cancel your approval, or require re-qualification at higher rates. Wait until after closing—even if it means waiting weeks longer for that new sofa.
Maxing Out on DTI
Just because you qualify at 43% DTI doesn't mean you should borrow that much. Leave room for life changes—job loss, medical expenses, car repairs, or growing families. The payment that's "affordable" at 43% DTI becomes crushing when unexpected expenses arise. Target 30-35% DTI for actual comfortable living, regardless of qualification limits.
Not Accounting for Escrow Payments
Many first-time buyers forget that mortgage payments include more than principal and interest. Property taxes, homeowners insurance, PMI, and HOA fees are added to your payment and count toward DTI. A $1,500 P&I payment might actually be $2,100 with all add-ons. Calculate total PITI (Principal, Interest, Taxes, Insurance) for accurate DTI.
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Frequently Asked Questions
What is a good debt-to-income ratio?
35% or below is considered excellent and qualifies you for the best mortgage rates and terms. 36-42% is acceptable for most loans but may not get premium rates. 43-49% is challenging and limits your options to FHA or lenders requiring compensating factors. 50%+ makes conventional mortgage qualification very difficult. For financial health beyond just qualifying, target 30% or less.
Do I use gross or net income for DTI calculations?
Always use gross income (before taxes and deductions) for DTI calculations—this is what lenders require. Your gross income is what appears on your W-2 Box 1 or tax return Line 1. Even though you budget with net income (take-home pay), lenders evaluate DTI using gross income because it's standardized across all borrowers and verifiable through tax documents.
Does rent count in my DTI ratio?
Yes, current rent counts in DTI calculations when applying for a mortgage. Lenders include your housing expense (rent or current mortgage) along with all other debts. When you're approved for the new mortgage, your new housing payment replaces the old one in the DTI calculation—you don't count both. This is why it's possible to qualify for a mortgage payment similar to your current rent.
Will paying off a credit card before applying help my DTI?
Yes, but only if you're paying it off completely. Lenders use the minimum payment shown on your credit report regardless of your actual balance. A card with $100 minimum payment counts as $100 in DTI whether you owe $5,000 or $500. However, paying it to $0 and keeping it open removes it from DTI calculations while maintaining your available credit (good for credit score).
Can I get a mortgage with 50% DTI?
It's very difficult but not impossible. FHA loans allow up to 56.99% DTI with strong compensating factors: credit score 680+, large down payment (10%+), substantial cash reserves (6+ months), or increasing income trend. Most conventional lenders stop at 45-50% even with perfect credit. Consider waiting and paying down debt—the difference between 50% and 40% DTI can save $50,000+ over the loan's life through better rates.
How much does DTI affect interest rates?
DTI significantly impacts rates, especially above 40%. The difference between 35% DTI and 45% DTI can cost 0.5-1% in interest rates—on a $300,000 30-year mortgage, that's $35,000-$65,000 more in total interest. Lenders price risk through rates, and high DTI means higher risk. Even if you qualify at 45% DTI, improving to 38% before applying can save tremendous money long-term.
Calculate Your Debt-to-Income Ratio Now
Use our calculator above to determine your DTI ratio and see where you stand. Understanding your DTI helps you plan for major purchases, identify opportunities to improve your financial position, and know what loan amounts you can realistically qualify for.
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