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 Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• Total Monthly Debt Payments — Sum of all monthly debt obligations (mortgage, credit cards, loans, etc.)
• Gross Monthly Income — Total 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 assess creditworthiness. Lower DTI ratios indicate better financial health and make loan approval more likely. 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.) and your total pre-tax income from all sources.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DTI ratio?
A: Generally, 35% or lower is excellent, 36%-49% is acceptable but may limit borrowing options, and 50% or higher is considered high risk.

Q2: Does DTI include living expenses?
A: No, only debt payments. Expenses like utilities, groceries, and insurance aren't included in DTI calculations.

Q3: How can I improve my DTI ratio?
A: Either increase your income (through raises, side jobs) or decrease your debt (pay down balances, avoid new debt).

Q4: Is front-end DTI different from back-end DTI?
A: Yes, front-end DTI only includes housing costs, while back-end DTI includes all debt obligations.

Q5: Do lenders look at gross or net income for DTI?
A: Lenders typically use gross (pre-tax) income for DTI calculations.