Debt to Income Ratios for Mortgage Calculator

Reviewed for financial accuracy by David Chen, CFA

The Debt-to-Income (DTI) ratio is a critical factor used by mortgage lenders to assess your borrowing risk. Use this calculator to quickly find your ratio and understand where you stand for loan pre-qualification.

Debt to Income Ratios for Mortgage Calculator

Your Estimated Debt-to-Income (DTI) Ratio

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A DTI of 36% or less is generally considered good.

Detailed Calculation Steps

Click ‘Calculate DTI’ to see the step-by-step breakdown.

Debt to Income Ratios for Mortgage Calculator Formula

$$ \text{DTI Ratio} = \frac{\text{Total Monthly Debt Payments}}{\text{Gross Monthly Income}} \times 100 $$ Formula Source: Consumer Financial Protection Bureau (CFPB)

Variables Used in the Calculator

• Monthly Housing Debt (PITI): The monthly cost of your mortgage’s Principal, Interest, Property Taxes, and Hazard Insurance. This is the new debt you are taking on or your current housing debt.
• Other Monthly Debts: The total minimum required monthly payments for all your other credit obligations, including credit cards, car loans, student loans, and other installment debts.
• Gross Monthly Income: Your total income before taxes and deductions are taken out. This often includes wages, bonuses, commissions, and other reliable sources of income.

Related Calculators

Explore other essential financial tools for your home ownership journey:

• Down Payment Savings Goal Planner
• Home Maintenance Budget Estimator
• Mortgage Refinance Breakeven Calculator
• PITI Payment Breakdown Tool

What is the Debt to Income Ratio (DTI)?

The Debt-to-Income (DTI) ratio is a personal finance measure that compares your total monthly debt payments to your gross monthly income. This ratio is expressed as a percentage. It is a critical metric used by banks, credit unions, and other mortgage lenders to determine your capacity to manage monthly payments and repay borrowed money. A lower DTI ratio indicates a lower risk to lenders.

Lenders typically focus on two types of DTI: the **Front-end DTI**, which only considers housing-related costs (PITI), and the **Back-end DTI** (the one calculated here), which includes all monthly debt obligations. For most conventional mortgages, a Back-end DTI of 43% is the highest generally allowed, though many programs prefer a DTI below 36%.

How to Calculate DTI (Example)

1. Determine Total Monthly Debt Payments: Sum all required minimum monthly debt payments. For example: Housing Debt ($1,500) + Car Loan ($300) + Credit Card Minimum ($200) = $2,000.
2. Determine Gross Monthly Income: Find your total income before taxes. For example, if your annual salary is $72,000, your Gross Monthly Income is $72,000 / 12 = $6,000.
3. Divide Debt by Income: Divide the total monthly debt by the gross monthly income: $2,000 / $6,000 = 0.3333.
4. Convert to Percentage: Multiply the result by 100 to get the DTI percentage: 0.3333 * 100 = 33.33%.

Frequently Asked Questions (FAQ)

• What DTI ratio is considered good for a mortgage? A DTI of 36% or less is generally considered excellent by lenders. A DTI below 43% is often the maximum limit for conventional mortgages.
• What debts are included in the DTI calculation? DTI includes minimum payments on credit cards, car loans, student loans, personal loans, and the estimated Principal, Interest, Taxes, and Insurance (PITI) of the proposed mortgage.
• How can I quickly improve my DTI? The two main ways to improve your DTI are to reduce your total monthly debt payments (e.g., pay down credit card balances) or increase your verifiable gross monthly income.
• Does my DTI affect my interest rate? Yes. A higher DTI suggests a higher risk, which can lead to a higher mortgage interest rate, while a lower DTI can help you qualify for the best available rates.