Debt-to-Income (DTI) Ratio Calculator
Your Debt-to-Income (DTI) ratio is a critical metric used by lenders to assess your ability to manage monthly payments and repay debts. It is calculated by dividing your total recurring monthly debt by your gross monthly income, expressed as a percentage. A lower DTI ratio demonstrates a good balance between debt and income, increasing your chances of getting approved for mortgages, auto loans, and credit cards.
Calculate Your DTI
Understanding Your DTI Results
Lenders typically have specific DTI thresholds for loan approval. While requirements vary by lender and loan type, here are general guidelines:
- 35% or less: Generally considered ideal. Lenders view this as a sign of good financial health and manageable debt.
- 36% to 43%: Often acceptable for many loans, including qualified mortgages, though lenders may require additional documentation or have stricter terms.
- 44% or higher: Considered high risk. You may face difficulties getting approved for new credit, or may only qualify for loans with higher interest rates. Many qualified mortgage criteria top out at 43%.
Example Calculation
For example, if your gross monthly income is $6,000, and your combined monthly debts (rent, car payment, credit cards) total $2,100, your DTI ratio would be calculated as follows:
($2,100 ÷ $6,000) x 100 = 35%.
This 35% ratio would generally be considered favorable by most lenders.