However, some government loans allow for higher DTIs, often in the 41-43% range. In the example above, the debt ratio of 38% is a bit too high. Some lenders, like mortgage lenders, generally require a debt ratio of 36% or less. Generally, an acceptable debt-to-income ratio should sit at or below 36%. Calculated debt ratio = 38.09% What is a Good Debt-to-Income Ratio? Then, multiply the number by 100 to find your percentage:ģ. First, divide your total debt by your total income:Ģ. Here’s an example of a monthly debt to income ratio formula calculation: Monthly debt total:ġ. To get a percentage, move the decimal point over to the right two times. The final step in calculating your debt-to-income ratio is to divide your total monthly debt payments by your monthly income gross. Be sure to include credit cards, auto loan, mortgage, and so on.
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If you’ve already created a budget, or used a free debt management tool, this should be easy. Next, determine what your monthly debt payments are. This must include all sources of income you may have. In order to figure your debt-to-income ratio, you need to determine your monthly gross income before taxes. Debt payments can include credit card debt, auto loans, and insurance premiums. What is a debt to income ratio (DTI)?Ī debt to income ratio (DTI) is the percentage of your gross monthly income that goes to debt payments.
If you’ve recently been in the market for a mortgage loan, you may have come across the term “debt-to-income ratio.” This ratio is one of the many factors lenders use when considering you for a loan. What’s a Good Debt-to-Income Ratio & How Do You Calculate It?
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