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 expressed as a percentage and is 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:

• Total Monthly Debt Payments — Sum of all monthly debt obligations (mortgage, car loans, credit cards, etc.)
• Monthly Income — Gross monthly income before taxes and other deductions

Explanation: The ratio shows what portion of income goes toward debt repayment each month.

3. Importance of DTI Calculation

Details: Lenders use DTI to assess creditworthiness. Lower DTI ratios indicate better financial health and make it easier to qualify for loans with favorable terms.

4. Using the Calculator

Tips: Enter all monthly debt payments in dollars (including housing, auto loans, credit cards, etc.) and your gross monthly income. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 35% or lower is excellent, 36-49% is acceptable, and 50% or higher may limit borrowing options.

Q2: What debts are included in DTI?
A: Include all recurring monthly debts - mortgage/rent, car payments, credit card minimums, student loans, personal loans, etc.

Q3: How is DTI different from credit utilization?
A: DTI compares debt payments to income, while credit utilization compares credit card balances to credit limits.

Q4: Does DTI include living expenses?
A: No, only debt obligations. Utilities, groceries, insurance, etc. are not included in DTI calculations.

Q5: How can I improve my DTI ratio?
A: Either increase your income or reduce your monthly debt payments by paying down balances or refinancing at lower rates.