Enrichment · Life Skills · Borrowing

The number a
lender looks at,
before they do.

Type your gross monthly income and the payments you already make. The calculator works out the two ratios lenders use, shows what a new loan would do to them, and how much room is left under your target.

Work out my ratioWhat you get

The debt-to-income calculator

The worked example is made up: a household with $5,200 a month before taxes, a car loan, a student loan and a card, weighing a $1,650 mortgage payment. Nothing you type leaves this browser.

Loading the calculator. If nothing appears, turn on JavaScript.

What you get

Enrichment · Life SkillsFree

What you finish with
Your front-end and back-end debt-to-income ratios now and with a payment you are considering, your monthly debt payments, and how much room is left under your target or how far over it you are. It prints as a one-page summary and downloads as a spreadsheet.
Who it is for
Young adults and families planning a car loan, a mortgage or a lease, first-time home buyers, and personal finance students and teachers.
Format
Browser calculator for a phone, tablet or computer, by touch or keyboard. Up to 30 debts. Prints a summary; downloads a spreadsheet (.csv); export and import a file.
Access
Free. No account, no sign-in and nothing to install. Everything you type stays in this browser; nothing is sent to Caveat.
Where it lives
The Life Skills space in Caveat Enrichment.
Support
Questions, a correction or a request: team@caveatacademic.com.

How to use it

  1. Type gross monthly income: pay before taxes, plus a co-borrower’s if you are applying together.
  2. List each monthly debt payment and mark housing payments as housing.
  3. Type a payment you are considering, if any, and whether it is housing.
  4. Read both ratios and the room under your target.
  5. Print the summary or download the spreadsheet.

Work out my ratio

How the ratios are worked out

Two fractions with gross income on the bottom.

Front-end: housing$1,650 mortgage payment$5,200 gross income31.7%Back-end: all debt$1,650 + $385 + $210 + $75$5,200 gross income44.6%Front-end: housing$1,650$5,20031.7%Back-end: all debt$2,320$5,20044.6%
The two ratios for the worked example with the mortgage it is considering: housing alone is 31.7% of gross income, and all debt payments are 44.6%.

The arithmetic

The front-end ratio divides housing payments by gross monthly income. The back-end ratio divides every required monthly debt payment, housing included, by the same income. Room under the target is the target share of income minus the payments. For a mortgage, the housing payment is the full monthly amount: principal, interest, property taxes, homeowners insurance and any HOA dues or mortgage insurance.

What counts, and what lenders do with it

Count minimum required payments on loans, cards, leases, child support and alimony; leave out living costs such as utilities and groceries. Lenders set their own limits and loan programs differ. A common rule of thumb is 28% for housing and 36% for everything; the Consumer Financial Protection Bureau notes that borrowers above about 43% are more likely to run into trouble making payments. A ratio is a lender’s measure, not a budget: it uses income before taxes, so a payment can pass the ratio and still be hard to afford.

Sources

  1. Consumer Financial Protection Bureau. What is a debt-to-income ratio? (consumerfinance.gov/ask-cfpb): gross monthly income, which payments count, and the note about 43%.
  2. Consumer Financial Protection Bureau. Ability-to-Repay and Qualified Mortgage rule, 12 CFR 1026.43: lenders must consider debt obligations and debt-to-income ratio or residual income.
  3. Federal Reserve Bank of St. Louis, Page One Economics on credit and borrowing: the 28/36 guideline as a common rule of thumb.
  4. U.S. Department of Housing and Urban Development, Buying a Home (hud.gov): what a full monthly mortgage payment includes.

The worked example is made up. This is arithmetic on your own numbers, not a loan decision; lenders apply their own rules. Your figures stay in this browser. Support: team@caveatacademic.com.