Debt-to-Income Calculator
Find your DTI ratio from debts and income.
Lenders use DTI to judge how much of your income goes to debt.
How the Math Works
The Debt-to-Income (DTI) ratio is calculated using a straightforward formula: DTI = monthly debt payments divided by gross monthly income, multiplied by 100. To use this formula, first sum all your monthly debt obligations including mortgage or rent, car loans, credit card minimum payments, student loans, and other recurring debts. Then divide this total by your total monthly income before taxes. The result is expressed as a percentage, giving you a clear numerical representation of your debt burden relative to your earnings. For example, if you pay $1,500 in monthly debts and earn $5,000 gross monthly, your DTI would be 30% ($1,500 ÷ $5,000 × 100).
Practical Applications
To apply this calculation practically, gather your recent pay stubs to determine your gross monthly income and collect statements showing your minimum monthly debt payments. Input these values into the calculator or perform the calculation manually to determine your DTI ratio. Lenders commonly use this metric to evaluate loan applications, with lower ratios indicating better repayment capacity. Most lenders prefer a DTI below 36%, and many set stricter limits such as 28% for housing costs and 36% for total debt. Use this calculation before applying for new credit to understand how additional debt might affect your ability to qualify for loans or credit cards.
Day-to-Day Use
Understanding your DTI ratio provides valuable insights for everyday financial decisions and helps you maintain healthy financial habits. By regularly monitoring your DTI, you can make informed choices about new purchases versus debt repayment, ensuring you don't take on obligations that become unaffordable. This metric is particularly useful when evaluating major purchases like a car or home, as it helps you determine what you can comfortably afford without overextending your finances. Additionally, knowing your DTI ratio enables you to create targeted strategies for improving your financial health, such as increasing income through side work or aggressively paying down high-priority debts to lower your overall ratio and improve your financial flexibility.
Worked example
$1,500 debt on $5,000 income → 30%.
FAQ
What's a good DTI?
Most lenders prefer 36% or less; 43% is often the ceiling for a qualified mortgage.