How to calculate your debt-to-income ratio
Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it’s the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt. To calculate your debt-to-income ratio:
Add up your monthly bills which may include:
* 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)
* Other debts
Note: Expenses like groceries, utilities, gas, and your taxes generally are not included.
Divide the total by your gross monthly income, which is your income before taxes.
The result is your DTI, which will be in the form of a percentage. The lower the DTI; the less risky you are to lenders. .
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