1. What is a Debt-to-Income (DTI) Ratio Calculator?

Definition: This calculator determines your debt-to-income ratio, which compares your monthly debt payments to your gross monthly income.

Purpose: Lenders use DTI to assess your ability to manage monthly payments and repay debts. A lower DTI shows better financial health.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( DTI \) — Debt-to-income ratio (percentage)
• \( debt \) — Total monthly debt payments (USD)
• \( income \) — Gross monthly income before taxes (USD)

Explanation: The ratio shows what percentage of your income goes toward debt payments each month.

3. Importance of DTI Ratio

Details: Most lenders prefer a DTI below 36%, with no more than 28% going toward housing expenses. A DTI above 43% may make it harder to qualify for loans.

4. Using the Calculator

Tips:

• Include all monthly debt obligations: mortgage/rent, car loans, credit cards, student loans, etc.
• Use gross income (before taxes and deductions)
• Income must be greater than $0 for calculation

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good DTI ratio?
A: Generally: <36% = excellent, 36-43% = acceptable, >43% = may need improvement.

Q2: Does rent count as debt in DTI?
A: Yes, your monthly rent payment is included in your debt calculations.

Q3: How can I improve my DTI ratio?
A: Either increase your income or reduce your monthly debt payments.

Q4: What debts are excluded from DTI?
A: Utilities, insurance, and living expenses typically aren't included - just contractual debt payments.

Q5: Do lenders look at front-end and back-end DTI?
A: Yes, front-end DTI (housing only) and back-end DTI (all debts) are both considered.