📖 Overview
Use this tool to evaluate borrowing readiness before submitting applications.
🧪 Example Scenarios
Use these default and higher-pressure example inputs to explore how sensitive this calculator is before using your real numbers.
| Input | Base Case | Higher Pressure Case |
|---|---|---|
| Monthly Debt ($) | 1,500 | 1,725 |
| Gross Monthly Income ($) | 6,000 | 5,400 |
⚙️ How It Works
This calculates debt-to-income ratio as monthly debt payments divided by gross monthly income, shown as a percent.
The Formula
DTI = (Monthly Debt Payments ÷ Gross Monthly Income) × 100
| DTI | Debt-to-Income ratio, as a percentage |
| Debt | Total recurring monthly debt obligations (loans, credit cards, lease) |
| Income | Gross monthly income before taxes |
💡Most conventional mortgage lenders require a DTI below 43%. FHA loans allow up to 50% in some cases. Reducing your DTI by even 5% can meaningfully improve your loan terms.
Quick Reference
| DTI Range | Lender View | What It Means |
|---|---|---|
| < 20% | ✅ Excellent | Minimal debt burden; strong creditworthiness |
| 20 – 35% | ✅ Good | Manageable debt; most loans will approve |
| 36 – 43% | ⚠️ Caution | Near the limit for many mortgage lenders |
| > 43% | ❌ High | Loan denial likely; focus on debt reduction |
When To Use This
- Use this tool when you need a fast decision during active planning or execution.
- Use this before committing money, time, or tradeoffs that are hard to reverse.
- Use this to compare options using the same assumptions across scenarios.
Edge Cases To Watch
- Results can be misleading if key inputs are missing, stale, or unrealistic.
- Very small or very large values may amplify rounding effects and interpretation risk.
- If assumptions change mid-decision, recalculate before acting.
Practical Tips
💡 Lower debt payments improve underwriting outcomes.
💡 Use gross income consistently when comparing lenders.
💡 Track this ratio before applying for major credit.
Frequently Asked Questions
❓ Why do lenders care about DTI?
It indicates repayment capacity relative to current obligations.
❓ Should income be net or gross?
Most lenders benchmark using gross income.