Home
Back
Income to Debt Ratio Formula:
| From: | To: |
The Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. It is expressed as a percentage and is used by lenders to assess a borrower's ability to manage monthly payments and repay debts.
The calculator uses the DTI formula:
Where:
Explanation: The ratio shows what percentage of your income goes toward debt payments each month.
Details: Lenders use DTI to evaluate creditworthiness. A lower DTI indicates better financial health and makes it easier to qualify for loans with favorable terms. Most lenders prefer a DTI below 36%, with no more than 28% going toward mortgage payments.
Tips: Enter your total monthly debt payments and gross monthly income in dollars. Both values must be positive numbers, with income greater than zero.
Q1: What is considered a good DTI ratio?
A: Generally, a DTI below 36% is good, 36-43% is acceptable but may limit loan options, and above 43% may make it difficult to qualify for most loans.
Q2: What debts are included in the calculation?
A: Include all recurring monthly debts: mortgage/rent, car payments, credit card minimum payments, student loans, personal loans, and any other ongoing debt obligations.
Q3: How often should I calculate my DTI?
A: It's good practice to calculate your DTI every 6-12 months, or whenever your financial situation changes significantly (new job, major purchase, or paying off debt).
Q4: Does DTI include living expenses?
A: No, DTI only includes debt payments. Living expenses like utilities, groceries, and insurance are not included in the calculation.
Q5: Can I improve my DTI ratio?
A: Yes, by increasing your income, paying down existing debt, or avoiding taking on new debt. Both reducing debt and increasing income will lower your DTI ratio.