How to Calculate PTI

Calculating your PTI will tell you what monthly mortgage payment you can afford.

The payment-to-income (PTI) ratio is used by mortgage lenders and prospective homeowners to determine whether a person can comfortably pay a monthly mortgage payment. A general rule of thumb is that your monthly mortgage payment should not exceed 31 percent of your monthly income. When shopping for a home mortgage, be prepared by knowing your PTI as you negotiate the terms of the loan.

Things You'll Need

• Calculator
• Pencil and paper
• Gross annual income
• Mortgage loan payment amount

Instructions

1. Calculate the amount of your household's gross annual income (before taxes).

2. Calculate your monthly gross income by dividing the gross annual income by 12. For example, if your gross annual income is $60,000, your monthly gross income is $5,000.

3. Calculate the PTI by dividing the monthly mortgage payment amount by your gross monthly income. If the mortgage payment is $1,475, dividing it by $5,000 equals a PTI of 0.295, or 29.5 percent. In this example, $1,475 is a comfortable mortgage payment amount, given your gross monthly income.

References

• What does PTI stand for?

Resources

• New mortgage, old problem?