Can you let me know what is the best debt to income percentage and what all goes into the debt column? Do the lenders figure an amount for such monthly expenses as gasoline, food, utilities, phone service and other non-exact monthly expenditures or is it a combination of mortgage/rent, revolving and installment accounts?
My mortgage lender took my gross income and divided into that ALL reported minimum payments (as show on the CRs) and added to that anything self-admitted like non-reporting loans or payment arrangements (e.g. my rent). All of that was expressed as a percentage. Other expenses like utilities, cell, school tuition, gas, food, etc. were excluded along with any charge cards that required me to PIF (like my Amex).
36% or less is the healthiest debt load for the majority of people. Avoid incurring more debt to maintain a good ratio.
37%-42% isn't a bad place to be. If your ratio falls in this range, you should start reducing your debts.
43%-49% is a ratio that indicates likely financial trouble. Start paying your debts now to prevent an overloaded debt situation.
50% or more is a dangerous ratio. You should be aggressively paying off your debts. Don't hesitate to seek professional help.
I took those ranges from an article I was reading a few weeks ago about calculating DTI. As for calculating your DTI, it was explained pretty well above me.
So they only base it on reported minimum payments (credit cards and loans) along with rent but they don't take other expenses into consideration like utilities, food, clothes ect? Is it always based on that?
Yes - everytime I have had my DTI calculated they took any minimum payments on debts reported on my CR's (mortgage, car loans, student loans, credit cards etc) and used that total plus any self reported items (rent) to calulcated total debt payments.