How do you determine your Debt to Income Ratio?

[Anonymous]

Just wondering.  I have $1,300 of revolving debt (old credit cards now closed and working with Credit Counseling to pay off - have increased my payments), $185 in collection (from old cable bill that's on my list to get paid), 50K deferred student loan (shows as positive/current).

Am wondering how lenders determine your ability to handle a new debt (secured one in this case for a car loan)?  Any ideas? Answers?

Thanks.

[Tuscani]

Debt-to-income ratio is the percentage of your income you use to pay your debts. Most banks and financial professionals agree that you should keep your debt-to-income ratio at less than 36 percent of your gross income. If you want to get a picture of how your situation measures up, there's a simple way to figure it out. Take your monthly gross income—let's say two thousand dollars a month—and multiply it by 36 percent:

($2000 x .36 = $720)

In this example, your debt payments shouldn't exceed $720 per month. It's a pretty simple formula, and it gives you a quick guideline as to how much of your income is considered a comfortable debt load.

[Anonymous]

Would that total include mortgage payments?

[Anonymous]

Most mortgage lenders will go to 45%. Some will go to 50% and some as high as 55% with compensating factors.

[Anonymous]

DTI is any trade you have on your credit br, mortgages, credit cards, car loans, etc. The less than 45% DTI is a little outdated. Today most lenders allow 45-55% depending on credit.

[Anonymous]

I have personally approved a HomeEquity loan that was at 64% DTI. I was Ok with the high DTI because the customer had substantial reserves and lots of equity in the home.