Use the Debt-to-Income (DTI) Ratio Mortgage Calculator to instantly determine your eligibility for various mortgage products. Lenders rely on both the Front-End (Housing) and Back-End (Total Debt) ratios to assess risk.
DTI Ratio Mortgage Calculator
Calculation Details
Enter your values and click ‘Calculate’ to see the step-by-step breakdown.
DTI Ratio Mortgage Calculator Formula
Formula Sources: CFPB, Investopedia
Variables
The calculator uses three key variables to determine your DTI ratios:
- Monthly Gross Income (MGI): Your total income before taxes and deductions.
- Proposed Monthly Housing Payment (PITI): The estimated total cost for your mortgage’s principal, interest, taxes, and insurance.
- Other Monthly Debt Payments (OMD): The total minimum required payments for all other recurring debts (e.g., auto loans, student loans, credit card minimums).
Related Calculators
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- Mortgage Affordability Calculator
- Amortization Schedule Calculator
- Loan-to-Value (LTV) Calculator
- Monthly Payment Estimator
What is the Debt-to-Income (DTI) Ratio?
The Debt-to-Income (DTI) ratio is a crucial financial metric used by mortgage lenders to evaluate a borrower’s ability to manage monthly payments and repay debts. It is calculated by dividing your total monthly debt payments by your monthly gross income. This ratio is a strong indicator of financial health and directly affects loan approval.
Lenders typically look at two types of DTI: the **Front-End Ratio** (housing costs only) and the **Back-End Ratio** (housing costs plus all other debt). Conventional loans often require a back-end DTI of 36% or lower, though some programs, like FHA or specific conventional loans, may allow ratios up to 43% or even 50% under certain mitigating circumstances.
How to Calculate DTI Ratio (Example)
- Determine Monthly Gross Income (MGI): Assume your MGI is $6,000.
- Determine Proposed Housing Payment (PMP): The PITI for the new house is $1,800.
- Determine Other Monthly Debt (OMD): Your car loan, student loan, and credit card minimums total $400.
- Calculate Front-End DTI: ($1,800 / $6,000) * 100 = 30%.
- Calculate Back-End DTI: (($1,800 + $400) / $6,000) * 100 = 36.67%.
- Evaluate: A 30/36.67 DTI ratio is generally considered acceptable or good by most mortgage lenders.
Frequently Asked Questions (FAQ)
A back-end DTI ratio of 36% or lower is generally considered “good” or ideal for conventional loan approval, though a DTI up to 43% is often the limit for most qualified mortgages.
You can lower your DTI by either increasing your monthly gross income (e.g., getting a raise) or by decreasing your total minimum monthly debt payments (e.g., paying off car loans or credit card balances).
No, the DTI calculation typically includes required minimum payments for installment loans (mortgage, car, student loans) and revolving debt (credit cards), but generally excludes monthly utilities like electricity, gas, and cell phone bills.
Front-End DTI only includes the proposed housing payment (PITI). Back-End DTI includes the proposed housing payment *plus* all other recurring minimum debt payments. Lenders primarily focus on the Back-End DTI.