Your debt-to-income ratio (or "DTI") is a number mortgage lenders look at when you are buying or refinancing a house. Lenders use your debt-to-income ratio to help them decide if you qualify for a home loan as well as to determine how much money they might be willing to offer you.
How to calculate debt-to-income ratio
Debt-to-income ratio is calculated using a simple formula. Take the total of your monthly debt payments, divide this total by your monthly income, and express the result as a percentage. Look at these examples:
|Total Monthly Debt Payments||Monthly Gross Income||Debt-to-Income Ratio (numeric)||Debt-to-Income Ratio (%)|
You should count all debts toward your total monthly debt payments. Include rent and mortgage, credit card, auto loan, student loan, insurance, child support, and alimony payments in your total. Your monthly gross income may include wages earned, plus tips and bonuses if applicable, social security income and pension payments, child support and alimony (if you wish this income to be considered).
Once you have these totals, divide your total monthly debt payments by your monthly gross income to calculate your debt-to-income ratio. You can also use our debt-to-income calculator to estimate your DTI.