Debt-to-Income Ratio Calculator

Ideal DTI Ratios for Mortgage Approval

Front-End Ratio (Housing Ratio) 
This ratio focuses on the amount of your income that goes towards housing expenses, including mortgage payments, property taxes, homeowner’s insurance, and association dues. Most lenders prefer this ratio to be no more than 28% of your gross monthly income.

Back-End Ratio (Total Debt Ratio)
This ratio considers all your monthly debt payments. Lenders generally look for a back-end ratio of 36% or less. However, some lenders might approve loans for borrowers with a higher back-end ratio, especially if they have strong credit scores or substantial down payments.

Having a DTI ratio within these preferred ranges increases your chances of securing a mortgage with favorable terms, including lower interest rates and down payment requirements. 

Exceeding these ratios does not necessarily disqualify you from getting a mortgage, but it might limit your loan options or result in higher interest rates.

Ways You Can Reduce Your Debt-to-Income Ratio

If your DTI ratio is higher than desired, there are several ways you can lower it. Here are some effective methods:

Pay Down Existing Debts 

• Focus on High-Interest Debts First - Prioritize paying off debts with the highest interest rates, such as credit card balances. This will reduce your overall debt more quickly and save you money on interest.
• Debt Snowball Method - Alternatively, pay off smaller debts first to eliminate monthly payments.

Avoid Taking on New Debt 

• Postpone Major Purchases - Delay buying a new car or taking out personal loans until after you have secured your mortgage.
• Limit Credit Card Usage - Minimize new charges on your credit cards to prevent increasing your debt load.

Restructure Current Debt

• Refinance Existing Loans - Refinancing high-interest loans for lower rates can reduce your monthly payments.
• Extend Loan Terms - Extending the repayment period of a loan can lower your monthly payment, but be cautious of the additional interest you might pay over time.
• Debt Consolidation - Consolidate Multiple Debts: Combining several debts into a single loan with a lower interest rate can simplify your payments and reduce your DTI ratio.

Create and Stick to a Budget 

• Track Your Expenses - Monitor your spending to identify areas where you can cut back.
• Set Financial Goals - Establish short-term and long-term financial goals to motivate you to reduce your debt.
• Lowering your DTI ratio not only aids in securing a mortgage but also contributes to a healthier financial future.