Debt-to-Income Ratio

How Much Debt

The typical American household will carry the following debt obligations:

home mortgage

second mortgage or home equity loan

auto loan(s)

student loans(s)

4-5 credit cards

retail financing loan

other

Basically, the more income you make, the more debt you can assume. The ratio of your debt-to-income is a percentage of debt that you can safely assume at your current income level.

The "Debt-to-Income" Ratio

The ratio is calculated by

dividing your fixed monthly debt expenses by your gross monthly income.

As a basic rule, you should live within the following percentages:

— monthly housing debt expenses including taxes, insurance: 25-28%

— other credit obligations (credit cards, auto loans, etc.): 10-15%

— your total debt obligations should be around: 36-40%

Calculating Your Debt-to-Income Ratio:
Input the following data to calculate your debt ratio:

			use this calculator to calculate the monthly expense from an annual expense

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Fixed monthly expenses include:

monthly housing debt/rent expenses including taxes, insurance.

monthly installment loan payments

monthly revolving credit line payments

real estate loan payment on non-income producing property

alimony and child support

any tax or legal assessments.

Monthly Mortgage or Rent (include escrow payment):

Monthly Auto or Other Installment Loan Payments:

Minimum Monthly Credit Card Payments:

Minimum Credit Line Payments (home equity):

Monthly Real Estate Non-Income Loan Payments:

Monthly Alimony and Child Support Payments:

Monthly Tax and Legal Assessments:

Monthly Other Payments:

Monthy Gross Salary or Pay:

Annual Bonus:

Monthly Alimony / Child Support:

Other Monthly Income:

Monthly Debt Payments:

Monthly Gross Income:

Debt-to-Income Ratio (should be around 36%):

Debt Ratio Barometer:

36% or less:
debt level within acceptable range for most people.
37%-42%:
debt level a little high, need to take corrective action to bring debt level down. You may consider paying off or consolidating some of your debt.
43%-50%:
danger level, need to take immediate action before you lose control of your financial situation.
50% or more:
excessive debt loan, may need to seek credit counseling services.

* Calculations are based upon the assumptions you entered. Please note that rounding errors can make a small difference in calculations. Your actual lending rate may vary depending on your credit quality and lender. The circumstances surrounding your credit and loan qualifications may result in different calculations.

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