Debt-to income ratio is an important parameter that determines your eligibility for a mortgage loan. It indicates your financial responsibility. A debt income ratio of 28/36 is regarded as a good debt income ratio. The requirements vary from one lender to another. And if one lender accepts 28/36 as the standard, another lender may as well relax the debt income ratio a bit.

How to calculate your debt-to income ratio

Debt-to income ratio also known as DTI, is calculated in the following manner. A step wise process is given below that will help you to calculate your debt-to income ratio.

1. Calculate your total income

First you are required to add the total net monthly income. It includes monthly wages, guaranteed bonuses and commissions; alimony payments (if applicable). You have to take into account earnings in the last 2 years.

2. Calculate total expenses

Once you are done with the calculation of your total monthly payments, you start calculating your monthly debt obligations. Credit card debts, mortgage payments etc are included in the calculation.

3. Divide monthly debt expenses by total monthly income

After obtaining the total monthly income as well as your monthly debt obligations, divide the monthly debt obligations by total monthly income. This gives you the debt-to income ratio.

4. Express it as percentage

Your debt income ratio is usually expressed as percentage. Lower is your debt income ratio, the better it is. A DTI of 28/36 is the standard debt-to income ratio and majority of the lenders accept this figure.

There is a deviation from the 28/36 rule and the FHA or the Federal Housing Administration allows you to obtain a loan if your debt-to income ratio is 29/41.