When applying for a loan, such as a mortgage, one of the primary factors that lenders take into consideration is your debt-to-income ratio. This is a calculation of how much personal debt you currently have in relation to the amount you currently earn. Knowing your own debt-to-income ratio can help you be prepared when applying for a loan, because it will help lenders determine how much additional debt you can handle. The following steps will help you figure your own debt-to-income ratio.
First of all, add up all of your current fixed monthly expenses. This includes minimum credit card payments, car payments, student loans, child support and any other expense. You do not have to include utilities or grocery expenses when figuring your debt-to-income ratio.
Next, add to your monthly expenses your expected monthly house payment, if applying for a mortgage, or your current monthly house payment. Be sure to include things like homeowner's insurance and property taxes.
Now, divide this amount by your monthly gross income. Your gross income is the amount you earn before any deductions or taxes are taken out. This will give you your debt-to-income ratio.