The debt-to-income ratio (DTI) is expressed as a percentage and is your total "minimum" monthly debt divided by your gross monthly income. The debt-to-income calculator takes in to account your annual income and monthly debts to determine your debt-to-income ratio. The calculator will also display your likely eligibility for receiving a mortgage based on your debt-to-income ratio. This calculator assumes you only have one mortgage and that your current housing expenses will be applied toward your new home.
- ANNUAL INCOME
- This is the combined annual income for you and your co-borrower. Include all income before taxes, including base salary, commissions, bonuses, overtime, tips, rental income, investment income, alimony, child support, etc.
- MORTGAGE/RENT PAYMENTS
- This is the sum of any house payments (rent or mortgage) other than the new mortgage you are seeking.
- MINIMUM CREDIT CARD PAYMENTS
- This is the sum of minimum credit card payments that you pay each month. Do not include credit card balances that you pay off in full each month.
- CAR LOAN PAYMENTS
- This is the sum of any monthly car payments that you pay each month as part of a lease and/or financed car payment.
- OTHER LOAN OBLIGATIONS
- Other loan obligations may include - Student loans; Alimony/child support payments; Any house payments (rent or mortgage) other than the new mortgage you are seeking; Rental property maintenance; and other personal loans with periodic payments.
Debt-to-Income Definitions and Questions
- DEBT-TO-INCOME RATIO (DTI) DEFINITION:
- Your DTI is expressed as a percentage and is your total "minimum" monthly debt divided by your gross monthly income.
- In addition to credit score, total assets, and LTV, the DTI is used to determine how much home a person qualifies for. The lower the DTI, the more appealing you are to lenders.
- WHAT IS "MINIMUM MONTHLY DEBT?"
- It's the total minimum you have to pay each month and includes payments such as car payment, student loans, and credit card payments. Add up each of these minimum monthly payments and that is your monthly debt. (Note: If you pay more than the minimum amount on your credit cards, this does not count against your DTI, since only the minimum amount you're required to pay is included in the total.)
- For example, if you owe $5,000 on a high-interest credit card and your minimum monthly payment on that card is $100, then $100 is the figure used for your DTI.
- HOW TO FIGURE OUT YOUR DTI:
- Add up your minimum monthly debt and divide it by your gross monthly income.
Gross monthly income: $1,000.
Monthly debt: $300 (car payment of $250 and credit card minimum payment $50 = $300)
300 / 1000 = 0.3, or 30%
Your DTI is 30%
- WHAT'S A GOOD DTI?
- Any DTI less than 36 percent is considered workable by most mortgage professionals. If the DTI is higher than 36 percent, it can be difficult to qualify for a mortgage. The lower your DTI, the more you can borrow and the more options you'll have. A DTI of 20 percent or below is considered excellent.