You’ll have an easier time qualifying for your desired rate and term with a lower DTI. Lenders use this metric to determine if you can afford a new debt payment, such as a mortgage, and calculate your interest rate if you qualify for a loan. What Is a Debt-to-Income Ratio?Ī DTI ratio measures how much of your monthly pre-tax income you use to pay for existing debts. Most mortgage lenders encourage a DTI ratio of 36% or less for a conventional mortgage. Once you complete all fields, the calculator will provide you with your DTI ratio. Finally, input your gross (pre-tax) monthly income. Do not include non-loan expenses, like groceries or utility payments, into this section. Your recurring debt payments should include all loan-related expenses, such as student loans, personal loans and credit card debt payments. If you don’t have a specific home in mind, try out different values to see how it affects your DTI ratio.įrom there, fill in additional details of your loan-including the term and interest rate-along with your recurring debt payments. To use our DTI calculator, input your home’s value and the amount you plan to put down. As such, it’s important that you work to improve your income and debt levels to lower your DTI ratio. It helps them determine whether or not a borrower can afford a loan and what interest rate they are likely to receive. One of the most important numbers that lenders look at when evaluating a mortgage application is your DTI ratio. How To Use This Debt-to-Income Ratio Calculator
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