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Debt to income ratio: How can you calculate it?

Posted on: 30th Jun, 2004 12:33 am
A debt-to-income ratio or back-end ratio shows the percentage of a person's monthly income that goes towards payment of debts like mortgage loan and car loan, child support and alimony, credit card bills, student loans, and other types of credit. It is evaluated as an individual's total monthly debt divided by gross monthly income.

To Sum Up,
"Debt-to-Income Ratio = Total Monthly Debt / Gross Monthly Income"
Generally, lenders do not approve a mortgage loan if the ratio exceeds 36% of your monthly gross income.

For example, A home-buyer makes $10,000 a month. The maximum amount of monthly debt payment at 36% of gross income would be $3600. Thus, the homebuyer would be approved for a mortgage which requires a maximum of total debt payment of $3,600.

Related Forums DiscussionCalculate it Yourself
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Debt to income ratio
i wpuld like to buy a hpuse near my son for health reseans
Posted on: 21st Jan, 2010 06:36 pm
shery, you need to give us more information in order for any of us to help you out.
Posted on: 22nd Jan, 2010 03:39 pm
This forum could use spell check too
Posted on: 22nd Jan, 2010 04:31 pm
nice rant, but that is pretty narrow minded. i just graduated from school, and have 400,000 in student loan debt. i make roughly 11,000 a month before taxes. thank goodness for the new repayment program, which caps my monthly repayment at 15% of income (IBR), (otherwise it would be about 40% of my income). My payments for the student loan end up being roughly 1500/month. Me and my wife have car payments equal to about 700/month, but have no other debts. Based on this ratio, I should only qualify for a 250,000 home (with 50,000 down and accounting for PITI.) My payments would be roughly 1800/month (30 fixed). So, what do i do with the rest of my money? So far as i can see, i make 11,000 a month, live in a very average home, and have 7000 a month left over? So, can you fathom it now? There is alot of different people out there with alot of different situations, so lets not group everyone in together huh.
Posted on: 02nd Apr, 2010 10:13 pm
jb123, to whom are you referring when you say "nice rant?" the posts on this thread go back quite a while, and there's not been new content of any real sort since september of 2009. it's hard for anyone to follow your final commentary without knowing the reference point. thanks.
Posted on: 04th Apr, 2010 05:16 pm
i had put the name of the person i was responding to in the subject line...tx conservative. they had wrote:

This 36% debt ratio is rediculous and I can't believe banks are approving loans for those who wish to carry this much debt. Maybe that's why the country is having financial challenges. I'm at a 9% debt ratio and can't fathom what the banks recommend.

ADVICE: Pay off your debts, save a minimum of 20% for a down payment, save for a 6 month emergency fund, and then buy a house.
Posted on: 09th Apr, 2010 06:35 pm
oh...gotcha...thanks for the explanation...i typically don't read the subject lines in responses because they are usually in response to the general topic; and so many address the recipient in the body of the response. i hadn't quite figured it out yet...so thanks.
Posted on: 10th Apr, 2010 04:42 pm
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