 TITLE: What Is an Ideal Debt-to-Income Ratio? CONTENT: How Does Debt-to-Income Ratio Work?\n-----------------------------------\nTo calculate your DTI ratio, add up your recurring monthly debt payments (including credit card, student loan, mortgage, auto loan and other loan payments) and divide the sum by your gross monthly income (the amount you make each month before taxes, withholdings and expenses).\nHere's an example of what your monthly debt obligations might look like:\nDebt\nMonthly payment\nMortgage (includes property tax & homeowners insurance)\n$1,150\nStudent loan\n$380\nCredit card No. 1 (minimum payment)\n$170\nCredit card No. 2 (minimum payment)\n$120\nAuto loan\n$480\n**Total**\n**$2,300**\nIf your total monthly debts as listed above were $2,300 and your gross monthly income was $5,200, your DTI ratio would be $2,300 divided by $5,200, or 0.44. DTI is commonly expressed as a percentage, so multiply by 100 to get 44%.\nMost lenders use this figure, sometimes referred to as your back-end DTI, along with your credit score to gauge your creditworthiness.\nMortgage lenders considering loan applications may factor in a third measurement, known as front-end DTI. This is the portion of your gross income that goes toward housing costs—rent or mortgage payments, property taxes, homeowners insurance, condo or homeowners association fees, and so on. Taking another look at the example above, if your housing costs are $1,150 and your gross monthly income is $5,200, your front-end DTI would be $1,150 divided by $5,200, or 22%. END