Debt-to-Income Ratio

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 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 monthly expense from 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.