Mortgages / Debt-to-Income Calculator
Debt-to-Income Calculator
Zillow's debt-to-income calculator takes into account your annual income and monthly debts to determine your debt-to-income ratio (DTI). Lenders use DTI as a qualifying factor for a mortgage to determine your home loan eligibility.
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What is a debt-to-income ratio?
A debt-to-income ratio is the percentage of gross monthly income that goes toward paying debts and is used by lenders to measure your ability to manage monthly payments and repay the money borrowed. There are two kinds of DTI ratios — front-end and back-end — which are typically shown as a percentage like 36/43.
Front-end ratio is the percentage of income that goes toward your monthly mortgage costs, such as:
- Mortgage principal and interest
- Hazard insurance premium
- Property taxes
- Mortgage insurance premium (if applicable)
- Homeowner's association (HOA) dues (if applicable)
Back-end ratio is the percentage of income that goes toward paying all recurring, minimum monthly debt payments, in addition to the monthly mortgage costs covered by the front-end ratio. Recurring monthly debt payments may include:
- Credit card payments
- Car loan payments
- Student loan payments
- Personal loan payments
- Child support payments
- Alimony payments
- Vacation/rental property costs
Lenders often look at both ratios during the mortgage underwriting process — the step when your lender decides whether you qualify for a loan. Our debt-to-income calculator looks at the back-end ratio when estimating your DTI, because it takes into account your entire monthly debt. In addition to your DTI ratio, lenders may look at your credit history, current credit score, total assets and loan-to-value (LTV) ratio before deciding to approve, deny or suspend the loan approval with contingencies.
What is a good debt-to-income ratio?
The lower your DTI ratio, the more likely you will be able to afford a mortgage — opening up more loan options. A DTI of 20% or below is considered excellent, while a DTI of 36% or less is considered ideal. Compare your debt-to-income ratio to our measurement standards below.
| DTI ratio | Measurement | What your DTI ratio means |
|---|---|---|
| 36% or less | DTI is good | A debt-to-income ratio of less than 36% is favorable to lenders, because it shows you're not overstretched. After paying your monthly bills, you most likely have money left over for saving or spending. |
| 37% - 50% | DTI is OK | The maximum allowed DTI can vary depending on the type of home loan you're applying for and the requirements set by your lender. In most cases, the highest DTI that a homebuyer can have is 50%. |
| 51% or higher | DTI is high | You can't still qualify for a home loan with a higher DTI ratio. Lenders will look at your credit score, savings, assets, down payment and property value in addition to your DTI when considering your loan eligibility. Paying down debt or increasing your income can help improve your DTI ratio. |
Mortgage DTI limits
Debt-to-income ratios for home loans can vary by factors such as the loan type, requirements set by individual lenders and the process by which the loan is underwritten (i.e. done manually or automated). Some lenders will consider whatever the Automated Underwriting System (AUS) allows as an acceptable debt-to-income ratio, while others have overlays that limit the DTI to a certain number. Here are the max debt-to-income ratios by common loan types.
Conventional loan max DTI
The maximum DTI for a conventional loan through an Automated Underwriting System (AUS) is 50%. For manually underwritten loans, the maximum front-end DTI is 36% and back-end is 43%. If the borrower has a strong credit score or lots of cash in reserve, sometimes exceptions can be made for DTIs as high as 45% for manually underwritten loans.
| Automated underwriting | Manual underwriting | |
| Front-end | Not applicable | 36% |
| Back-end | 50% | 43% |
FHA max DTI
The maximum debt-to-income ratio for FHA loans is 55% when using an Automated Underwriting System (AUS) but may be higher in some cases. Manually underwritten FHA loans allow for a front-end maximum of 31% and back-end maximum of 43%. For credit scores above 580 and if other compensating factors are met, the DTI ratio may be as high as 40/50 for manually underwritten FHA loans.
| Automated underwriting | Manual underwriting | |
| Front-end | Not applicable | 31% |
| Back-end | 55% | 43% |
VA loan max DTI
As long as the borrower is approved or eligible through an Automated Underwriting System (AUS), there is no cap on the debt-to-income ratio for VA loans. For manually underwritten VA loans, on the other hand, the total maximum DTI is typically 41%.
| Automated underwriting | Manual underwriting | |
| Front-end | No max | 36% |
| Back-end | 70% | 41% |
USDA max DTI
The maximum DTI for a USDA loan through an Automated Underwriting System (AUS) is 55%. For manually underwritten USDA loans, the front-end maximum DTI is 29% and the back-end is 41%.
| Automated underwriting | Manual underwriting | |
| Front-end | Not applicable | 29% |
| Back-end | 55% | 41% |
How to calculate your debt-to-income ratio
To calculate your DTI for a mortgage, add up your minimum monthly debt payments, then divide the total by your gross monthly income.
(Monthly debt / Gross monthly income) x 100 = Debt-to-income ratio
For example: If you have a $250 monthly car payment and a minimum credit card payment of $50, your monthly debt payments would equal $300. Now assuming you earn $1,000 a month before taxes or deductions, you'd then divide $300 by $1,000 giving you a total of 0.3. To get the percentage, you'd take 0.3 and multiply it by 100, giving you a DTI of 30%.
($300 / $1,000) x 100 = 30%
How to lower your debt-to-income ratio
To improve your DTI ratio, the best thing you can do is either pay down existing debt (especially credit cards) or increase your income.
While paying down debt, avoid taking on any additional debt or applying for new credit cards. If planning to make a large purchase, consider waiting until after you've bought a home. Try putting as much as you can into saving for a down payment. A larger down payment means you'll need to borrow less on a mortgage. Use Zillow's down payment assistance tool to surface assistance funds and programs you may qualify for. Additionally, use a DTI Calculator to monitor your progress each month, and consider speaking with a us at Zillow Home Loans to get pre-qualified for a mortgage.
What is monthly debt?
Monthly debts are recurring monthly payments, such as credit card payments, loan payments (like car, student or personal loans), alimony or child support. Our DTI formula uses your minimum monthly debt amount — meaning the lowest amount you are required to pay each month on recurring payments. When calculating your monthly debts, you can exclude:
- Monthly utilities like water, garbage, electricity or gas bills
- Car insurance expenses
- Cable bills
- Cell phone bills
- Health insurance costs
- Groceries, food or entertainment expenses
To calculate your total minimum monthly debts, add up each minimum payment. If you pay more than the minimum amount on your credit cards, this does not count against your DTI, since only the minimum amount you're required to pay is included in the total. For example, if you owe $5,000 on a high-interest credit card and your minimum monthly payment on that card is $100, then $100 is the minimum monthly debt amount used for your DTI.
What is gross monthly income?
Your gross monthly income is the sum of everything you earn in one month, before taxes or deductions. This includes your base monthly income and any additional commissions, bonuses, tips and investment income that you earn each month. To calculate your gross monthly income, take your total annual income and divide it by 12. If you're hourly, you can multiply your hourly wage by how many hours a week you work, then multiply that number by 52 to get your annual salary. Divide your annual salary by 12 to get your gross monthly income.
What is an Automated Underwriting System?
The mortgage underwriting process is almost always automated using an Automated Underwriting System (AUS). The AUS uses a computer algorithm to compare your credit score, debt and other factors to the lender requirements and DTI requirements for the loan you're applying for. While lenders use to manually underwrite loans, only a few (if any) do so today and usually only under a few special circumstances like:
- If you do not have a FICO score or credit history
- If you're new to building credit
- If you've had financial problems in the past like a bankruptcy or foreclosure
- If you're taking out a jumbo loan
Related Articles
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Here's a more in-depth look at DTIs, which lenders use to ensure you have enough income to pay both a new mortgage and other monthly debts.
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