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Your lender will look at two key pieces of information when you apply for a loan: your credit history and your debt-to-income ratio (DTI). Your debt-to-income helps lenders to determine if you can repay your loan. It can also help you to obtain a clearer view of your financial situation. A debt ratio of 35% or less is generally preferred by lenders, but this can vary. 

Here are some steps to help you calculate your DTI:

1.    Know the formula
Your debt-to-income ratio is your total monthly debt – divided by your gross income – which is then expressed as a percentage.

A. Total:  All monthly debt payments
B. Gross monthly income    =    C. Debt-to-income ratio of X%

2.    Add up your recurring monthly debts

This should include all regular monthly debts you are required to pay. For example:  

  • Rent or mortgage payment
  • Minimum credit card payments 
  • Auto loan and student payments
  • Car and/or life insurance
  • Child support and/or alimony

Any other monthly debt obligations and your sources of monthly income wages/salary:

  • Tips and/or bonuses
  • Social security or pension
  • Child support and alimony

3.     Divide your total debt by your gross monthly income

You will arrive at your personal debt-to-income ratio. For example:

$6,000 (gross monthly income) ÷ $2,000 (monthly debt) = 33% debt-to-income ratio

You can use our affordability calculator to help you determine your DTI.

Contact us with any questions.

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