Debt-to-income calculator tool

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GETTING STARTED

Debt-to-income calculator

Figure out your debt-to-income ratio to see how much of your

income goes toward paying debt each month.

Determining your debt-to-income ratio is one way to check the overall health of your

nances. It measures how much pressure debt is putting on your budget, which helps you

decide if you can handle more debt.

For example, if you have a debt-to-income ratio of 36 percent, then 36 cents of every

dollar earned is going to pay for debt, leaving you 64 cents to pay for everything else.

A high debt-to-income ratio could affect your ability to get additional credit because

creditors may be concerned that you won’t be able to handle their debt on top of what

you already owe.

You can also use the debt-to-income ratio as a benchmark for reducing your debt—as your

debt decreases, so will your debt-to-income ratio. This means money is being freed up to

use on other things like saving, expenses, and emergencies.

What to do

•

Complete the "Debt log” to gure out your total monthly debt payment. If you

have court-ordered xed payments, such as child support, count these as debt for

this purpose.

•

Figure out your gross monthly income (before taxes or insurance). This includes

money earned from a job or child support payments you may receive. If your income

varies from month to month, estimate your income on a typical month (it’s better to

estimate lower for the purposes of this tool).

A step further

If your debt-to-income ratio is above the guidelines, use the “Debt action plan” to help

reduce your debt and lower your debt-to-income ratio.

The Debt-to-income calculator gives

you a benchmark for planning.

1. Enter your total monthly debt payment on the rst line of the equation. You can copy it from

the "Debt log."

2. Enter your gross monthly income on the second line. If your income varies from month to month,

estimate what you receive in a typical month.

3. Calculate your debt-to-income ratio and review the recommended ratios to see how

yours compares.

Lenders use your debt-to-income ratio when considering your loan application.

CALCULATE YOUR DEBT-TO-INCOME RATIO .

Your total monthly debt payment includes credit card, student, auto, and other

loan payments, as well as court-ordered xed payments, like child support

Divide by your gross monthly income

which is all of your income before taxes

and insurance

Multiply by 100 to calculate your current debt-to-income ratio %

Here are some guidelines to think about:

HOMEOWNERS

Consider maintaining a debt-to-

income ratio for all debts of 36

percent or less. Some lenders will

go up to 43 percent or higher.

Your home mortgage is included in

this ratio.

RENTERS

Consider maintaining a debt-to-

income ratio for all debts of 15-20

percent or less. Your rent is not

included in this ratio.

36%

or less

15-20%

or less

If your debt-to-income ratio is higher than the guideline (as either a homeowner or renter), you may

want to think about ways to lower debt to put less pressure on your budget. Use the "Debt action

plan" for help.

Mortgage lenders look at your debt-to-income ratios for both total debt and

mortgage debt when considering your loan application. If you're a homeowner,

you can also calculate your mortgage debt-to-income ratio.

28-35%

or less

CALCULATE YOUR MORTGAGE DEBT-TO-INCOME RATIO .

Your total monthly mortgage debt payment includes only the principal and

interest on your mortgage. Your property taxes, insurance, and condo or

homeowner association fees may or may not be included in your monthly

mortgage payment

Divide by your monthly gross income which is all of your income before taxes

and insurance

Multiply by 100 to calculate your current mortgage debt-to-income ratio %

MORTGAGE DEBT FOR HOMEOWNERS

Consider maintaining a

mortgage debt-to-income

ratio of 28 to 35 percent.

Here are some guidelines to think about:

If your ratio is higher than the guidelines, and you want help, consider contacting a certied HUD

housing counselor. Find a certied counselor by visiting consumernance.gov/nd-a-housing-

counselor.

This tool is included in the Bureau of Consumer Financial Protection’s Your Money, Your Goals: A

nancial empowerment toolkit. The Bureau has prepared this material as a resource for the public.

This material is provided for educational and information purposes only. It is not a replacement

for the guidance or advice of an accountant, certied nancial advisor, or otherwise qualied

professional. The Bureau is not responsible for the advice or actions of the individuals or entities

from which you received the Bureau educational materials. The Bureau’s educational efforts are

limited to the materials that the Bureau has prepared.

This tool may ask you to provide sensitive information. The Bureau does not collect this information

and is not responsible for how your information may be used if you provide it to others. The Bureau

recommends that you do not include names, account numbers, or other sensitive information and

that users follow their organization’s policies regarding personal information.