Debt-to-Income (DTI) Ratio Calculator
A Surprising Story: The "Hidden" Debt That Stalled a Dream
Priya and Rohan had been saving for years to buy their first home. They had a good income and a healthy down payment. Confident, they applied for a home loan. To their shock, their application was rejected due to a high Debt-to-Income (DTI) ratio. They couldn't understand why.
Using a DTI calculator, they started listing all their monthly payments. They included their car loan and credit card bills, but the DTI was still within limits. Then Priya remembered something: she was a co-signer on her younger brother's student loan. Although he was paying it, the bank legally considered it her debt too. They entered that EMI into the calculator, and the DTI shot up, crossing the bank's acceptable threshold. The "hidden" debt they had overlooked was the problem. This surprising discovery allowed them to take corrective action. After refinancing her brother's loan without her as a co-signer, their DTI dropped, and their home loan was approved a few months later.
Frequently Asked Questions (FAQ)
What is a good DTI ratio?
A DTI of 36% or less is generally considered excellent and favorable by lenders. A ratio between 37% and 43% is often acceptable, but may come with stricter loan terms. A DTI of 50% or more is typically seen as high risk, making it difficult to get new credit. For more detailed benchmarks, you can refer to guidelines from major credit bureaus like Experian.
What is included in DTI calculations?
DTI includes recurring monthly debts like mortgage, rent, car loans, student loans, and credit card minimum payments. It does not include monthly expenses like utilities or food. For more info, see resources from CIBIL.
What is the difference between Front-End and Back-End DTI?
Front-End DTI only considers housing debt. Back-End DTI, which this calculator computes, includes *all* monthly debt payments. Lenders almost always focus on Back-End DTI. Learn more at Equifax.
How can I lower my DTI ratio?
There are two primary ways to lower your DTI: increase your income or decrease your debt. Focus on paying down loans with high interest. For strategies, explore resources from TransUnion or MyFICO.