Work out your front-end and back-end debt-to-income ratio and what would bring it down. Runs on your device.
Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income, shown as a percent. The US Consumer Financial Protection Bureau gives the same rule: add up all your monthly debt payments and divide them by your gross monthly income. Gross means before tax. The page calls this the back-end ratio and counts your housing payment in it. It also shows the front-end ratio, which is the housing payment alone divided by gross monthly income. A yearly income is divided by 12 first. The CFPB's own example has 1,500 for a mortgage, 100 for a car loan and 400 for other debts, which is 2,000 against 6,000 of income, or 33%. Type those numbers and the page gives 33.3%.
The page opens on 5,000 of monthly income with 1,600 of housing, 350 of car loans, 300 of student loans and 150 of card minimums. That is 2,400 of debt, so the back-end ratio is 48% and the front-end ratio is 32%. The result places the back-end ratio against limits that are published by Fannie Mae for its own loans: a baseline of 36% for manually underwritten loans, up to 45% on those loans if credit score and reserve requirements are met, and up to 50% for loans run through its Desktop Underwriter system. The 28/36 guideline, which asks for housing at 28% or less and total debt at 36% or less, is described by lenders as a budgeting guideline and not a requirement. On the example, 48% sits between 45% and 50%.
The table works out three targets, 36%, 45% and 50%. For each one it shows the most debt you could carry at your income, how much monthly debt you would need to cut, and the income you would need to keep your debts as they are. On the opening example, reaching 36% means debts of at most 1,800, so a cut of 600 a month, or an income of at least 6,666.67 (each figure is rounded in the direction that meets the target). Reaching 45% needs a cut of 150 or an income of at least 5,333.34, and 50% is already met. A cut in debt payments moves the ratio at once, while paying off a loan helps only when its monthly payment goes away. Raising income lowers the ratio the same way: the same 2,400 on 6,000 is 40%.
Lenders decide which debts count and how income is counted, and they differ by country, loan type and lender. Fannie Mae's guide, for example, counts recurring obligations such as leases and support payments as well as loans and cards, and some lenders include an estimate for a new housing payment, tax and insurance, so the lender decides which documented obligations count. This page counts what you type. It does not include utilities, groceries, insurance or tax withheld from pay, and it does not judge whether a payment is comfortable. Income and debts are monthly amounts without a currency symbol, so any currency works. Nothing you type is stored or sent. This is an estimate, not financial advice, and the levels are reference points, not a verdict on whether a lender would approve a loan.
Add your monthly debt payments and divide by your gross monthly income. With 2,400 of debt payments on 5,000 of income, the ratio is 2,400 รท 5,000 = 48%. The page writes the sum out with your numbers under the result.
Front-end is the housing payment alone divided by gross income: 1,600 on 5,000 is 32%. Back-end adds every other monthly debt payment: 2,400 on 5,000 is 48%. The 28/36 guideline asks for 28% or less on the first and 36% or less on the second.
It depends on the lender and loan. Fannie Mae states a baseline of 36% for manually underwritten loans, up to 45% with credit score and reserve requirements, and up to 50% for loans run through Desktop Underwriter. The page shows which of these levels your ratio falls under.
Gross, before tax and other deductions. The CFPB's description of the ratio uses gross monthly income. If you only know a yearly figure, choose Per year and the page divides it by 12.
Either the debt payments go down or the income goes up. On the opening example, cutting 600 a month of payments takes the ratio from 48% to 36%, and so does raising income from 5,000 to 6,666.67 with the debts unchanged. The table lists both for each target.
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