Mortgage Debt-to-Income Ratio Calculator

Estimate your mortgage debt-to-income (DTI) ratio. Lenders use this ratio to evaluate how much of your income goes toward paying your mortgage and other debts. This can help you understand if you qualify for a mortgage loan.

Understanding Your Mortgage Debt-to-Income Ratio

Your mortgage debt-to-income (DTI) ratio is a key factor that lenders use to evaluate your ability to repay a mortgage loan. It compares your monthly debt payments to your monthly gross income, and helps lenders assess how much of your income goes toward paying debt.

Formula for Calculating Mortgage DTI Ratio

The formula for calculating the mortgage DTI ratio is:

DTI Ratio = (Monthly Mortgage Payment + Other Monthly Debts) ÷ Monthly Gross Income × 100

Where:

  • Monthly Mortgage Payment: Your monthly payment for the mortgage loan, including principal, interest, property taxes, and insurance.
  • Other Monthly Debts: Other debt payments, such as car loans, credit cards, student loans, and personal loans.
  • Monthly Gross Income: Your total monthly income before taxes and deductions.

Why Mortgage DTI Ratio Matters

Lenders use your DTI ratio to determine how much of your income is allocated to debt payments. A lower DTI ratio indicates that you have more income available to cover new debt payments, such as a mortgage loan. A higher DTI ratio may indicate that you are already carrying a significant amount of debt, which can make it harder to manage additional mortgage payments.

What is Considered a Good Mortgage DTI Ratio?

A good mortgage DTI ratio generally falls below 43%, though some lenders may allow higher ratios, depending on the type of loan or other factors such as credit score. A lower DTI ratio means you are in a better financial position to take on a mortgage loan.

DTI Ratio Categories:

  • 0%-20%: Excellent. You have very little debt relative to your income.
  • 20%-36%: Good. You can likely qualify for a mortgage with favorable terms.
  • 36%-43%: Fair. You may still qualify for some loans, but may face higher interest rates.
  • 43%+: High. It may be more difficult to qualify for a mortgage, and you may face high interest rates or stricter loan terms.

Factors That Impact Your Mortgage DTI Ratio

  • Income: A higher income helps lower your DTI ratio by increasing your capacity to handle debt payments.
  • Debt Payments: Reducing existing debts, such as credit card balances or car loans, can improve your DTI ratio.
  • Loan Type: Different types of loans have different qualifying criteria. For example, FHA loans may allow a higher DTI ratio than conventional loans.

How to Improve Your Mortgage DTI Ratio

  • Pay down existing debt: Reducing credit card debt or personal loans can significantly improve your DTI ratio.
  • Increase your income: Increasing your monthly income through a raise, side job, or investment income can help lower your DTI ratio.
  • Refinance your debts: Refinancing high-interest loans to lower monthly payments can also help improve your ratio.