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Mortgage Info > Mortgage Calculators > Debt to Income Ratio's

Debt to Income Ratio Calculator

Debt to Income Ratio / DTI Calculator - What are your mortgage Debt to Income Ratios? - Calculate your Debt to income ratios or DTI used by mortgage lenders to determine your maximum loan amount. There are two main debt to income ratio forumlas; a) front-end DTI - which is your housing expense / income and b) back-end DTI - which is housing + monthly liabilities / income.

The lower your debt to income ratio the better. The recommended debt to income ratios are 28 / 36. Generally you do not want your back-end DTI to exceed 42% or you will have difficulty qualifying for a loan. Use this debt to income ratio calculator to calculate your current debt to income ratios just like mortgage lenders. Learn more about debt to income ratios below.

Debt to Income Ratio Calculator Debt to Income Ratio Calculator Instructions

Step 1: Enter Gross Monthly Income
Step 2: Enter Minimum Monthly Liabilities
Step 3: Enter PITI Mortgage Payment / Rent Payment
Click "Calculate my Debt to Income Ratio"

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Debt to Income Ratio / DTI Ratio Calculator ///

Step 1: Enter Gross Monthly Income
Enter the total "Gross" monthly income for each borrower. Gross income is before "taxes" are taken out of your paycheck. If more than three borrowers, combine total amounts in box A.
Borrower A Borrower B
Gross Monthly Income  
Step 2: Monthly Mortgage or Rent Payments ///
Enter your current monthly housing expense to calculate your front-end debt to income ratio and your overall DTI ratios. If you are renting, this will be your current monthly rent amount. If you currently own a home, this will be your total P.I.T.I. mortgage payment with taxes and insurance included. If you are purchasing a home, then use your expected PITI payment or use our mortgage calculator with taxes and insurance to calculate the payment for you.
Enter PITI Mortgage Payment or Rent  
Step 3: Minimum Monthly Payments  ///
Enter the combined "Total Minimum Required Payments" for each of the type of consumer debt liabilty as indicated on your monthly statements to calculate your back-end debt to income ratio.
Auto Loan Payment (s)  
Credit Card(s)  
Student Loan(s)  
Personal Loan(s)  
401 K / Retirement Account Loan(s)  
Other Loan(s) (RV, Boat, Trailer, Etc)  
Other Liabilities - these may or may not be reported on your credit report but must be used during loan qualifying. Enter monthly payment amounts.
Alimony / Palimony  
Child Support  
Liens / Judgement   
 


Debt to Income Ratio Definition

Debt to Income or DTI is defined as the total percentage of a consumers gross monthly income that goes towards paying monthly consumer debt. Included in the debt calculation are monthly rent or current PITI mortgage payments, car payments (both purchase or lease payments), credit card payments, loan payments, legal liabilities such as tax payments, child support, alimony and any other monthly payments that are reported on a credit report.

Some items not calculated in your DTI ratios are insurance, groceries, utilities, entertainment and generally any monthly expenses not reported on your consumer credit report.

Two Types of Debt to Income Ratios

There are two main DTI ratio calculations used by mortgage lenders for mortgage qualifying. They are front-end debt to income ratio and back end debt to income ratio.

  • Front-end DTI Ratio - this debt to income calculation is your monthly housing expense divided by your gross monthly income will provide your front-end DTI percentage.

  • Back-end DTI Ratio - calculate your back-end debt to income by adding all your minimum monthly payments and your current housing expense and divided by gross monthly income.

How Debt to Income Ratios Affect Mortgage Qualifying

Mortgage lenders use the debt to income ratio calculation to determine the maximum loan amount a borrower can obtain and how much house they can afford. The primary reason the DTI ratio is used is to insure a borrower in not over their head with payments and can truly afford the home they are purchasing. Mortgage qualifying is based on gross monthly income versus net income (after tax income) so mortgage lenders have recommended debt to income ratios to take into consideration taxes and other living expenses and leave enough net monthly income to put money aways in savings.

Historically, borrowers with high debt to income ratios eventually fall behind on their mortgage payments and may end up losing their homes to foreclosure, conversely the lower the debt to income the smaller the chance of falling behind on your mortgage. This is the primary reason mortgage underwriting will use the DTI as a main factor of qualifying for a mortgage is to limit minimize the chances of a borrower losing a home to foreclosure.

Recommeded Debt to Income Ratios

Each type of mortgage loan program has specific guidelines and requirements for debt to income ratios. Generally there is no mortgage lenders who will fund a mortgage loan if your debt to income ratio is over 55% of your gross income.

The reason is simply because because a borrower will not have enough money to make all payments at the end of each month once taxes are deducted. If your DTI is 55% of your gross income and your taxes are another 35% of your gross income that only leaves about 10% of your income to pay for food, clothing, utilities, gas etc.

Following are some of the recommened debt to income ratio guidelines for the most common types of mortgage loan programs:

  • Conforming / conventional mortgage debt to income ratio are 28/36
  • FHA loan debt to income ratios are 28/41
  • VA loan debt to income ratios are 41/41

Under certain situations you maybe able to obtain a higher a mortgage with higher debt to income ratio that 41% assuming you have compesating factors like; perfect credit with high credit scores, lots of money in the bank in for form of reserves or low loan to value ratios.

High Debt to Income Ratio Solutions

If you debt to income ratios are above 55% you should aggressively pay down you monthly obiligations. If you are unable to paydown your monthly debt and own a home and have a low loan to value, you maybe able to complete a cash-out refinance to consolidate your debt. If you do not have equity, you may need to look into a debt relief program.

Debt to Income Ratio Calculator Disclosure* - The information provided on or through this site is for purposes of general consumer education only and is not intended as a substitute for advice from a qualified professional, such as, but not limited to, a lawyer, mortgage broker, accountant, investment advisor, insurance broker, financial planner, real estate agent or home inspector. We can not and do not guarantee the accuracy or the applicability of this information to your circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance and real estate issues.

 

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