How to calculate dti for mortgage loan

Use our income-debt ratio calculator to determine how much of your pre-tax monthly income goes towards paying monthly debts.

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Your debt-to-income (DTI) ratio (also called income-debt ratio) measures your monthly debt obligations in comparison to your monthly gross income, or the amount of money you earn before taxes. It’s calculated by dividing your minimum monthly debt payments by your monthly gross income, and it’s expressed as a percentage. 

When you go through the mortgage application process, lenders review your DTI ratio to assess whether you can handle monthly mortgage payments in addition to your current monthly obligations. If you don’t meet a lender’s minimum DTI ratio requirements, you might not be approved for a mortgage loan. A debt-income ratio calculator can help you crunch the numbers.

How does our income-debt ratio calculator work?

To calculate your DTI ratio using our income-debt ratio calculator, enter the following information: 

Annual gross income: Enter your annual gross income – the total amount you earn per year before taxes and deductions are taken out. If you don’t know what your annual income is, estimate it based on your average monthly income. 

Minimum monthly credit card payment: This is the amount on your credit card bills you must pay, at a minimum, each month. 

Auto loan payment: Include your auto payment for a leased or purchased vehicle, along with any monthly payments toward a spouse or another family member’s vehicle. 

Other loan obligations: Also include any other loan obligations you may have, such as student loans, personal loans, home equity loans, and other debts that appear on your credit report. 

After inputting these numbers, our calculator will show you how much money you have left over each month after paying your total monthly debts and your estimated maximum mortgage payment.  

The more money you have remaining after paying your existing monthly debts, the more you can afford in a monthly mortgage payment. However, it’s important not to overextend your housing budget. Consider the other costs of homeownership – homeowners association (HOA) dues, maintenance, repairs, and future improvements – when figuring out a comfortable monthly housing payment. 

Our DTI ratio calculator results will show whether your DTI ratio is very good, good, okay, or too high. Based on your results, you should be able to make an informed decision about whether you’re ready to purchase a home or you should focus more on decreasing your debt to improve your DTI ratio first.

What is debt-to-income ratio (DTI)?

The factors that make up your DTI ratio vary based on whether the lender is calculating your DTI ratio for a mortgage using the front-end or back-end DTI ratios. 

Front-end DTI ratio: This ratio only accounts for your monthly mortgage debt, plus housing-related expenses, such as homeowners insurance and property taxes. 

Back-end DTI ratio: The back-end DTI ratio includes both your housing-related debt and all your other monthly debt obligations. 

During the home buying process, a mortgage lender may use one or both of these DTI ratios to decide whether you can afford to purchase a home.

How to calculate your debt-to-income ratio

To calculate your DTI for a mortgage, you add up all your monthly debts and divide the sum by your gross monthly income. The result is converted into a percentage to get your DTI ratio. 

Step 1: Add up monthly debts 

Add up all the minimum monthly payments for debts that typically appear on your credit report, such as your credit card bills, student loans, auto loans, and mortgage loans. Do not include monthly expenses such as groceries, utility bills, childcare, healthcare, and tuition that’s not attached to a student loan. 

Step 2: Divide the sum by your gross monthly income 

Next, calculate your gross monthly income. Your gross monthly income can income from your job and other non-employment sources, such as retirement income, child support, or alimony. If you have self-employment income, you might be able to include it but lenders might require proof of consistent income for several years.  

For example, conventional borrowers typically must provide two years’ worth of tax returns for their self-employment or business income to be included. 

Step 3: Convert the result into a percentage. That’s your DTI ratio.

What is a good debt-to-income ratio for a mortgage?

When you apply for a mortgage, a DTI ratio of 36% or less is considered good. If your ratio is between 36% and 50%, it’s considered okay or average. Borrowers with a DTI ratio over 50% are unlikely to be approved for most conventional and government-backed mortgages. To get approved for a mortgage loan, you may have to work on lowering your DTI ratio first if it happens to be bad, especially if you need a home loan with bad credit. 

According to the Consumer Financial Protection Bureau (CFPB), the minimum debt-to-income ratio to qualify for a mortgage is usually 43% or less, depending on the loan program. Some lenders may approve you for a mortgage if your DTI ratio is higher than 50%, though, if you have significant cash reserves or a higher credit score. 

DTI limits for key loan types

Here are the acceptable DTI ratios for conventional, FHA, VA, and USDA loans. 

Although the table above shows the maximum acceptable DTI ratios for different mortgages, keep in mind that different lenders have different standards for each loan program they offer. Also, some lenders may require a higher or lower DTI ratio, based on its underwriting guidelines, your credit score, down payment amount, and income.

How to lower your debt-to-income ratio

To improve your chances of getting approved for a mortgage, work on lowering your debt-to-income ratio by paying down debt, increasing your income, and avoiding large purchases until after your home loan closes.  

If you can, target the debt that has the highest minimum monthly payment first — it may have the biggest impact on reducing your debt-to-income ratio. Try asking for a promotion or pay increase, or consider picking up a side hustle to grow your monthly income. To avoid increasing your DTI ratio, hold off on big credit card purchases or loans until after you’ve moved into your home. This includes furniture shopping, decorating, or other housing-related expenses.   

Another strategy worth considering: Choose a house that’s more affordable. Use a home affordability calculator to calculate how much home you can afford.

Debt-to-income ratio calculator FAQs

Does your debt-to-income ratio affect your credit score? 

Your debt-to-income ratio does not affect your credit score because income isn’t a factor that’s used to calculate it. Most lenders use the FICO credit scoring model – this model considers your payment history, amount of debt owed, new credit, length of credit history, and your credit mix. However, since the amount of debt you owe accounts for 30% of your credit score, it can decrease or increase your score. 

How does DTI ratio apply in automated versus manual underwriting? 

When a lender reviews your mortgage application using the automated underwriting process, the DTI ratio requirement may be lower. During the manual underwriting process, a lender considers other factors, such as cash reserves, income, and your credit score, to arrive at a DTI ratio decision.

How is DTI calculated for a mortgage?

What is the formula for DTI ratio?

What is the typical DTI for a mortgage?

Can you get a mortgage with 60% DTI?