1. What is Debt-to-Income Ratio?

The Debt-to-Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. For homeowners, it typically includes mortgage payments and insurance costs.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• \( Mortgage \) — Monthly mortgage payment ($)
• \( Insurance \) — Monthly homeowners insurance payment ($)
• \( Income \) — Monthly gross income ($)

Explanation: The equation calculates what percentage of your income goes toward housing-related debt payments.

3. Importance of DTI Calculation

Details: Lenders use DTI to evaluate a borrower's ability to manage monthly payments and repay debts. A lower DTI shows you have a good balance between debt and income.

4. Using the Calculator

Tips: Enter your monthly mortgage payment, homeowners insurance cost, and gross monthly income. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 36% or less is considered excellent, 43% is the maximum for qualified mortgages, and 50%+ is considered high risk.

Q2: Does DTI include property taxes?
A: For complete housing expense calculations, yes. This calculator focuses on mortgage and insurance only.

Q3: Should I use gross or net income?
A: Lenders typically use gross (pre-tax) income for DTI calculations.

Q4: How can I improve my DTI?
A: Either increase your income or reduce your monthly debt payments (or both).

Q5: Does this include other debts?
A: This calculator shows housing-related DTI only. Total DTI would include all monthly debt obligations.