What is Debt-to-Income (DTI / FOIR) Ratio Calculator and How Do You Calculate It?
DTI (%) = (Total Monthly Debt Obligations / Gross Monthly Income) * 100This standardized equation forms the quantitative foundation used by chartered financial analysts (CFA), investment bankers, and corporate treasurers under GAAP and IFRS reporting frameworks.
Formula Components & Operational Definitions
Total DebtSum of all home loan, car loan, personal loan, and credit card monthly payments.
IncomeTotal pre-tax monthly household earnings.
Step-by-Step Real-World Worked Example
A borrower with Rs 1,20,000 monthly income pays Rs 30,000 rent/mortgage, Rs 10,000 auto loan, and Rs 5,000 personal loan.
Strategic Takeaway: A 37.5% DTI is within normal bank qualification parameters (under 43-45%).
Industry Benchmark Comparison Table
DTI measures solvency risk and the probability of borrower default during economic downturns.
Easily qualifies for prime mortgage and loan rates.
Standard qualification threshold for most retail banks.
May be rejected or require co-signers and collateral.
Executive Sector Note: In India, Fixed Obligation to Income Ratio (FOIR) is used interchangeably with DTI.
Analytical Comparison & Critical Limitations
- Does not include variable living expenses such as food, utilities, and healthcare.
Frequently Asked Questions
What is a good DTI ratio for a home loan?
A total DTI below 36% to 40% is ideal for getting the lowest interest rates and rapid loan approval.