Home Loan Calculator Debt Income Ratio
The ratio uses mortgage payments other mandatory real estate expenses principal interest property taxes homeowner s insurance and uses your income as the denominator.
Home loan calculator debt income ratio. For instance if your debt costs 2 000 per month and your monthly income equals 6 000 your dti is 2 000 6 000 or 33 percent. To determine your dti ratio simply take your total debt figure and divide it by your income. Frontend debt to income ratio. The debt to income ratio is a number that lenders use to decide the qualifications of someone wanting a loan.
Essentially your dti ratio takes into consideration your full debt exposure ensuring you can meet your home loan repayments today and in the future. Replace item name in the template with your income and loan item. Here s the info you ll need to enter into the dti calculator. Today the debt ratio requirements for an fha loan are 29 front end ratio and 41 back end ratio based upon gross income.
That is your debt to income ratio. This ratio allows banks and lenders to decide how much their customers can afford before having financial difficulties helping them set lending amounts. If you are still confused to run it using excel you can download this simple debt to income ratio calculator to help you find out your ratio. This debt to income ratio calculator is designed to help you understand what you need to do in order to qualify and close on a mortgage loan.
If they had no debt their ratio is 0. Our debt to income calculator takes into account your annual income and monthly debts to determine your debt to income ratio which is one of the ways lenders use to determine whether you are eligible for a mortgage. Inside this tool there is a ratio classification which i quoted from gerri detweiler. Debt to income ratio dti is the ratio of total debt payments divided by gross income before tax expressed as a percentage usually on either a monthly or annual basis.
As a quick example if someone s monthly income is 1 000 and they spend 480 on debt each month their dti ratio is 48. The sweet spot for approval is a ratio of 41 or less. To calculate your debt to income ratio add up all of your monthly debts rent or mortgage payments student loans personal loans auto loans credit card payments child support alimony etc. Your debt to income ratio is your total debts and liabilities divided by your gross income before tax income.