Chartered Financial Analyst (CFA) specializing in personal finance, mortgage underwriting, and consumer credit risk assessment.
The **Debt-to-Income Ratio (DTI) Calculator** helps assess your ability to manage monthly payments and repay debts. Lenders use this critical ratio to qualify you for mortgages, auto loans, and personal loans. Enter values for any three of the four core parameters (Total Monthly Debt, Gross Monthly Income, DTI Ratio, or Maximum Allowable Debt) to solve for the missing one.
Debt to Income Ratio Calculator
Instructions: Enter values for any three of the four core parameters to solve for the missing one.
DTI Parameters (Monthly)
DTI Ratio Formula
The Debt-to-Income Ratio ($DTI$) is the percentage of your gross monthly income that goes toward paying your monthly debt.
DTI Ratio (%):
$$DTI = \frac{D_{total}}{I_{gross}} \times 100$$Maximum Debt for Target DTI:
$$D_{max} = \frac{DTI_{target}}{100} \times I_{gross}$$ Formula Source: Consumer Financial Protection Bureau (CFPB)Variables Explained (P, F, V, Q – Parameters)
- $D_{total}$ (Total Monthly Debt, $P$): Total required minimum monthly payments (including housing, car, and revolving credit).
- $I_{gross}$ (Gross Monthly Income, $F$): Total income earned before taxes and deductions.
- $DTI$ (DTI Ratio, $V$): The percentage of income consumed by debt payments.
- $D_{max}$ (Max Allowable Debt, $Q$): The debt amount equivalent to a target DTI (e.g., 43%).
Related Loan Qualification Calculators
Determine your borrowing power and affordability:
- Loan Affordability Calculator
- Maximum Loan Amount Calculator
- Loan Comparison Calculator
- Debt Consolidation Calculator
What is Debt-to-Income Ratio?
The **Debt-to-Income (DTI) Ratio** is a critical financial metric used by lenders as an indicator of a borrower’s ability to take on and repay new debt. It is calculated by dividing your total required monthly debt payments by your gross monthly income. A low DTI ratio signals that a borrower has enough residual income to handle a new monthly payment, whereas a high DTI indicates the borrower may be overextended financially.
Lenders typically categorize DTI into two types: Front-End DTI (housing costs only) and Back-End DTI (all monthly debts). Most lenders focus on the Back-End DTI, with a ratio of 43% being the maximum limit for many qualified mortgages. A DTI below 36% is generally considered excellent and allows for the most favorable loan terms.
How to Calculate DTI Ratio (Example)
A borrower has total monthly debt ($D_{total}$) of \$2,000 and a gross monthly income ($I_{gross}$) of \$5,000. We solve for the DTI Ratio ($DTI$):
- Step 1: Identify Monthly Debt and Income
$D_{total} = \$2,000$ and $I_{gross} = \$5,000$.
- Step 2: Apply the DTI Formula
$DTI = (D_{total} / I_{gross}) \times 100 = (\$2,000 / \$5,000) \times 100 = \mathbf{40\%}$.
- Step 3: Determine Max Allowable Debt (based on a 42% limit)
Assuming a target limit of $42\%$: $D_{max} = (42 / 100) \times \$5,000 = \mathbf{\$2,100}$.
The DTI is $\mathbf{40\%}$, which is within most standard lending limits, but close to the maximum threshold.
Frequently Asked Questions (FAQ)
A DTI ratio of 36% or less is typically preferred for conventional mortgages, although many lenders will approve loans up to 43% DTI. VA and FHA loans may allow slightly higher ratios.
Included debts are mandatory minimum payments: housing (rent or mortgage PITI), car loans, student loan minimums, credit card minimum payments, and other revolving or installment loan payments.
Gross monthly income (before taxes and deductions) is used. This can include salary, commissions, bonuses, and investment income, provided it is stable and verifiable.
DTI is a personal or consumer credit risk metric based on monthly income and debt. The Quick Ratio is a corporate solvency metric based on a company’s assets and liabilities (balance sheet) to determine immediate liquidity.