Your debt-to-income (DTI) ratio compares how much you owe each month with how much you earn. It’s a helpful way to understand if you may be taking on too much debt. It’s a good idea to try to work toward a DTI of 35% or less, which is the ratio that most lenders consider ideal. Here’s how you can calculate your DTI:
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. See the FAQs for more information.
- 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.