How to Calculate Your Debt-to-Income Ratio for a Mortgage
If you are considering applying for a mortgage, you should know your debt-to-income ratio before applying. InCharge Debt Solutions explains that the debt-to-income ratio "compares the amount of your debt (excluding your mortgage or rent payment) to your income." This ratio plays a large role in determining your mortgage eligibility. You can find an online calculator or do the math yourself with a few simple steps.
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Instructions
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1
Make a list of all of your monthly bills. Include bills you do not currently pay, such as deferred student loans or collection accounts you are allowing to age off of your credit report.
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2
Add up the amount of debt you have each month. Include only debts such as rent, car payments, loan payments and credit card payments. Do not include flexible expenses such as your utilities or grocery bills.
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3
Review your last four paychecks. It is easier to determine your gross monthly income (before taxes) if you are salaried. If you are paid by the hour, it involves a bit more math. Add up the amounts on each of the four paychecks and divide that total by four. This is your gross monthly wage.
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4
Total all other sources of income -- such as alimony and child support, bonuses, commissions, and tips and dividend and interest earnings -- in a one-month period. Add this amount to your gross monthly wage in Step 3.
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5
Divide the total amount of your monthly bills in Step 2 by your total income in Step 4. The number you get is your debt-to-income ratio. Multiply that number by 100 to get a percentage. Generally, your debt-to-income ratio should be below 28 percent.
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