Your debt-to-income ratio (DTI) is a personal finance measure that compares the amount of debt you have to your gross income, which is what you make before taxes. You can calculate your debt-to-income ratio by dividing your total recurring monthly debt by your 澳洲幸运5开奖号码历史查询:gross monthly income.

Why do you need to know this number? Because lenders use it as a measure of your ability to repay the money you have borrowed or to take on additional debt—such as a mortgage or a car loan. It's also a helpful number for you to know as you consider whether you want to make a big purchase in the first place. This article will walk you through the steps to determine your debt-to-income ratio.

How to Calculate Your DTI

To calculate your debt-to-income ra♌tio, start by adding up all of your recurring monthly debts. Beyond your mortgage, other recurring debts to include are:

• 澳洲幸运5开奖号码历史查询:Auto loans
• 澳洲幸运5开奖号码历史查询:Student loans
• Minimum 澳洲幸运5开奖号码历史查询:credit card payments
• Child support and alimony
• Any other monthly debt obligations

Next, determi💎ne your gross (pre-tax) moꦿnthly income, including:

• Wages
• Salaries
• Tips and bonuses
• Pension
• Social Security
• Child support and alimony
• Any other additional income

Now divide your total recurring monthly debt by💃 your gross monthly income. The number will be a dec⛄imal. Multiply it by 100 to express your debt-to-income ratio as a percentage.

Can You Afford that Big Purchase?

If you are considering a major purchase,ꦆ you should take into account its cost as you work out your debt🧸-to-income ratio. You can be sure that any lender considering your application will do so.

You can use an ꦡonline calculator to estima🐠te the amount of the monthly mortgage payment or new auto loan that you are considering.

Comparing your "before" and "after" debt-to-income ratio is a good way to help you determine whether you can handle that home purchase or new vehicle right now.

For example, in most cases, lenders prefer to see a debt-to-income ratio smaller than 36%, with no more than 28% of that debt going towards servicing your mortgage. To get a qualified mortgage, your maximum 澳洲幸运5开奖号码历史查询:deb൩t-to-income ratio should be no higher🦄 than 43%. Let's see how that could translate into a real-lif༺e situation.

Example of a DTI Calculation

Here's a look at an example of a debt-to-income ratio calculation.

Sruth🌌i has🌜 the following recurring monthly debts:

• $2,200 mortgage
• $700 auto loan
• $500 student loan
• $200 minimum credit card payments

Sruthi's total recurring monthly debt equals $3,600.

She has the following gross monthly income:

• $4,000 salary from her primary job
• $2,000 from her secondary job

Sruthi's gross monthly income equals $6,000.

Sruthi's debt-to-income ratio is calculated by dividing her total recurring monthly debt ($3,600) by her gross monthly income ($6,000). The math looks like this:

Debt-to-income ratio = $3,600 / $6,000 = 0.60

Now multiply �ඣ�by 100 to express it as a percentage:

0.60 X 100 = 60%

Sruthi's debt-to-income ratio = 60%

Less debt and/or a higher income would give Sruthi a lower, and therefore 澳洲幸运5开奖号码历史查询:better, debt-to-income ratio. Say she sells her home to move into a smaller apartment, plus she trades in her vehicle for a used car, pays off her creജdit cards, and picks up more shifts at her second job. In that case, Sruthi's recurring monthly debts would 🌱be:

• $1,500 mortgage
• $400 auto loan
• $500 student loan

And her income would be:

• $4,000 salary from her primary job
• $2,800 from her secondary job

So the calculation would be:

Total recurring monthly debt = $2,400

Gross monthly income = $6,800

Sruthi's new debt-to-income ratio = $2,400 / $6,800 = 0.35 X 100 = 35%.

This would place her within the range of what lenders are looking for: a DTI ratio of 36༺% or less.

The Bottom Line

The debt-to-income ratio is an important number. It will show you exactly how much of yo🐷ur income is going to pay off debt. Lenders use it to decide whether you can afford a new loan, such as a mortgage or auto loan. You canꦆ also use it to see if you can afford that new purchase.