Understand your
debt-to-income ratio.
A ratio compares supplied monthly payments with monthly qualifying income. It is one calculation, not a loan decision.
Meet Jordan’s fictional example
Monthly qualifying income: $6,000. Total housing: $1,500. Other monthly debt: $600.
- Housing ratio: $1,500 ÷ $6,000 × 100 = 25%.
- Add housing and other debt: $1,500 + $600 = $2,100.
- Total debt ratio: $2,100 ÷ $6,000 × 100 = 35%.
A household budget includes additional living expenses. A lender determines the actual qualifying income and debts for a real application.
TRY THE NUMBERS
A ratio you can understand.
Use the fictional figures below to see how monthly payments relate to supplied qualifying income.
Housing / income25.00%
Housing + debt / income35.00%
Formula: payments ÷ (income + additional qualifying income) × 100. Illustrative arithmetic, not an eligibility decision.
YOUR TURN
Explore the learning pathway →What changes when the debt changes?
Keep housing at $1,500 and income at $6,000. Reduce other monthly debt to $300. What is the new back-end ratio?