Ali Hdabe - Realtor

HOW TO CALCULATE DEBT TO INCOME RATIO?

The debt-to-income ratio is the percentage of your monthly gross income that goes towards paying debts.

Why is this important for you to know? It’s one of the ways that lenders determine your borrowing risk, for things like a home loan. If you have a low DTI, your chances of a loan approval are higher than if you have a high DTI.

So how exactly do you calculate your debt-to-income ratio? Take all your monthly expenses, including monthly rent or house payment; monthly alimony or child support payments; student, auto, and other monthly loan payments; credit card monthly payments (use the minimum payment); and other debts, then divide that total by your pre-tax income, that’s your DTI.

Simply put, debt-to-income ratio = monthly expenses ÷ gross income!

Are you familiar with your DTI? Still not quite sure how to calculate it, or what should be included? Send me a DM with all your questions!