1. What is Debt to Income Ratio?

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's commonly used by lenders to evaluate a borrower's ability to manage monthly payments and repay debts.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• \( PITI \) — Principal, Interest, Taxes, and Insurance (monthly mortgage payment)
• \( \text{Other Debts} \) — All other monthly debt obligations
• \( \text{Monthly Income} \) — Gross monthly income before taxes

Explanation: The equation calculates what percentage of your monthly income goes toward debt payments.

3. Importance of DTI Calculation

Details: Lenders use DTI to assess loan eligibility. Most conventional loans require DTI below 43%, with lower ratios (36% or less) preferred for better rates.

4. Using the Calculator

Tips: Enter all amounts in USD. Include all monthly debt obligations (credit cards, car payments, student loans, etc.) in Other Debts. Use gross income (before taxes).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between front-end and back-end DTI?
A: Front-end DTI only includes housing costs (PITI), while back-end DTI (calculated here) includes all debt obligations.

Q2: What DTI do lenders prefer?
A: Ideal is ≤36%, with ≤28% for the mortgage alone. Maximum typically allowed is 43% for qualified mortgages.

Q3: How can I improve my DTI ratio?
A: Pay down debts, increase income, or consider a less expensive home to lower PITI.

Q4: Does DTI include utilities and living expenses?
A: No, only recurring debt payments. Living expenses aren't considered in DTI calculations.

Q5: Can I get a mortgage with high DTI?
A: Some government-backed loans (FHA, VA) may allow higher DTIs with compensating factors like excellent credit or significant savings.