Debt- to- income calculator

Before any financial institution lends money or extends credit, it will want to make sure that you’re financially capable of paying back what you borrow (plus interest.) One way to determine whether you have the financial footing to handle a new loan or credit card is to compare the money you earn to your monthly financial obligations.

This comparison of monthly income versus debt is known as your debt-to-income ratio, or DTI for short.

Put another way, your DTI ratio is the percentage of your income (gross, monthly) that you’re using to cover your monthly debt payments. It’s a measurement of your borrowing capacity. A lower DTI ratio is better, in terms of the lender’s risk, since you have more money available to repay the money you borrow.

Although your credit score isn’t directly impacted by your debt- to-income ratio, lenders or credit issuers will likely request your income when you submit an application. Just as your credit score will be one factor in their application review process, your debt-to-income ratio will also be taken into account.

What is a good debt-to-income ratio?
As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment.