A debt-to-income ratio is a personal finance measure that compares the amount of debt you have to your gross income. Lenders use the debt-to-income ratio as a way to measure your ability to manage the payments you make each month and repay the money you have borrowed. It is calculated by dividing your total recurring monthly debt by your gross monthly income.

To calculate your debt-to-income ratio, start by adding up all of your recurring monthly debts, including:

  • Mortgage
  • Auto loans
  • Student loans
  • Minimum credit card payments
  • Child support and alimony
  • Any other monthly debt obligations

Next, determine your gross (pre-tax) monthly income, being sure to include:

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

Finally, divide your total recurring monthly debt by your gross monthly income. The quotient will be a decimal; multiply by 100 to express your debt-to-income ratio as a percentage.

Here's an example. Mary has the following recurring monthly debts:

  • $1,000 mortgage
  • $500 auto loan
  • $200 student loan
  • $200 credit card
  • $400 other monthly debt obligations

Mary's total recurring monthly debt equals $2,300.

Mary has the following gross monthly income:

  • $4,000 salary from primary job
  • $2,000 from second job

Mary's gross monthly income equals $6,000

Mary's debt-to-income ratio is calculated by dividing her total recurring monthly debt ($2,300) by her gross monthly income ($6,000):

Debt-to-income ratio = $2,300 / $6,000 = 0.38

Multiply by 100 to express as a percentage:

0.38 X 100 = 38%

Mary's debt-to-income ratio = 38%

Less debt and/or a higher income would lower (and improve) Mary's debt-to-income ratio. For example, once Mary pays off her student and auto loans, her debt-to-income ratio (assuming all other factors remain the same) would be:

Total recurring monthly debt = $1,600

Gross monthly income = $6,000

Debt-to-income ratio = $1,600 / $6,000 = 0.27 or 27%.

  1. How do I lower my debt-to-income (DTI) ratio?

    A debt-to-income ratio is a personal finance measure that compares the amount of debt you have to your overall income. Lenders ... Read Answer >>
  2. What's considered to be a good debt-to-income (DTI) ratio?

    Your debt-to-income ratio helps lenders determine your credit worthiness. Find out how to calculate your score and whether ... Read Answer >>
  3. How does my debt-to-income (DTI) ratio affect my ability to get a mortgage?

    Find out how much your debt-to-income ratio affects your ability to get a good mortgage rate when buying a home. Read Answer >>
  4. What are the differences between balance-to-limit ratio and debt-to-income ratio?

    Learn how to differentiate between your balance-to-limit ratio and your debt-to-income ratio, how they are calculated, and ... Read Answer >>
  5. Does my debt-to-income (DTI) ratio affect my credit score?

    Though closely related, your debt-to-income ratio doesn't affect your credit score as directly as you might think. Read Answer >>
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