The debt-to-income ratio (DTI) is the percentage of a borrower's monthly gross income that goes toward paying debts. The DTI ratio includes one's housing expenses (mortgage principal and interest payment, property taxes and insurance) plus all other recurring monthly payments divided by their gross monthly income.
Here is an exapmle:
Gross Monthly Income | $8,000 | ||
Expenses | |||
Housing | |||
Mortgage Principal & Interest | $1,200 | ||
Property Taxes | $250 | ||
Homeowner's Insurance | $75 | ||
Total Housing Expense | $1,525 | ||
Top Ratio ($1,525 / $8,000) | 19.06% | ||
Auto Loan | $300 | ||
Student Loans | $150 | ||
Credit Cards | 250 | ||
Other | $100 | ||
Total Other Expenses | $800 | ||
Total of all Expenses (housing + other) | $2,325 | ||
Bottom Ratio ($2,325 / $8,000) | 29.06% |