How to Use the Debt-to-Income Ratio Calculator
- Enter your gross monthly income before taxes.
- Enter your rent or mortgage payment, including taxes, insurance and HOA for owners.
- Add monthly payments for auto loans, student loans, card minimums and other debts.
- Press Calculate.
- Review the ratio and the room remaining under 36% and 43%.
Formula
Back-end DTI = total monthly debt payments ÷ gross monthly income × 100 Front-end DTI = housing payment ÷ gross monthly income × 100
Example Calculation
With $6,000 gross monthly income, $1,800 for housing, $400 for a car, $250 for student loans and $100 in card minimums, total debt is $2,550. The back-end DTI is 42.5% and the front-end is 30%. That is within what many lenders accept, but above the 36% guideline some prefer.
What Is a Debt-to-Income Ratio?
DTI expresses your monthly debt obligations as a percentage of gross monthly income. It is a snapshot of how stretched your budget may be and one of the main inputs in mortgage underwriting.
Front-End vs Back-End Ratio
The front-end ratio looks only at housing costs. The back-end ratio includes every recurring debt. Lenders often check both, and the back-end ratio is usually the stricter test.
How to Improve Your Ratio
- Pay off small balances to remove their monthly payments.
- Refinance to a lower payment when it makes sense.
- Delay new financing before applying for a mortgage.
- Document additional steady income.
Tips
- Recalculate with the payment on the new loan you want, not only existing debts.
- Include the full housing payment for owners.
- Use the mortgage affordability calculator to turn the ratio into a price range.
Common Mistakes
- Using take-home income instead of gross.
- Leaving out student loans in deferment, which some lenders still count.
- Counting groceries or utilities as debt.