⚠️ Important: Financial figures generated here are for planning purposes. Actual results may vary based on market conditions and individual circumstances.
What is Debt-to-Income (DTI) Ratio?
Measures the percentage of your gross monthly income that goes toward paying debts.
How it Works
1. Quantify total 'Monthly Debt' payments.
2. State 'Gross Monthly Income'.
3. View your percentage score.
Step-by-Step Guide
- 1 Debt
- Sum all monthly loan payments.
- 2 Income
- Total gross monthly earnings.
- 3 Ratio
- Debt divided by Income.
Example
Input: $1,500 Debt, $5,000 Inc
Result: 30% (Healthy)
FAQ
What is a good DTI?
Below 36% is ideal; 43% is often the limit for mortgages.
Does rent count as debt?
For mortgages, usually yes (as housing expense). For basic DTI, strictly debt payments.
Gross or Net income?
DTI is calculated using Gross Income (before taxes).
Does this affect credit score?
Not directly, but it affects loan approval.
How to lower DTI?
Pay off loans or increase earnings.
Conclusion
Lenders use DTI to gauge risk. Maintaining a DTI below 36% opens doors to better interest rates and loan approvals. If your ratio is high, focus on increasing income or paying down debt before applying for new credit.