This Debt-to-Income Ratio Calculator helps determine your eligibility for home loans. Lenders typically look for a DTI ratio of 50% or less. A lower DTI ratio indicates better financial health.
- Annual Income: Your total yearly income before taxes, which is divided by 12 to determine your monthly income.
- Monthly Debt Payments: The sum of all your recurring monthly debt obligations, including:
- Mortgage or rent payments
- Credit card minimum payments
- Car loan payments
- Student loan payments
- Alimony and child support payments
- Other recurring debts
- Debt-to-Income Ratio (DTI):The percentage of your monthly income that is used to pay debts. It is calculated using the formula:
DTI = (Total Monthly Debt Payments / Monthly Income) × 100
- Remaining Monthly Income: The amount left after subtracting total monthly debt payments from monthly income:
Remaining Income = Monthly Income - Total Monthly Debt Payments
A lower DTI ratio indicates better financial health, while a higher DTI may suggest difficulty in managing debt obligations. Lenders typically prefer a DTI below 36%, with 43% often being the maximum allowable limit for mortgage qualification.