# Getting Smart With Your Debt-to-Income Ratio

Your debt-to-income ratio shows how much debt you pay compared to your monthly salary. The lower it is, the better.

At Midland Mortgage, we use the debt-to-income ratio (DTI) to determine how much home you can afford. Learn how we use it and what you can do to get the home you want.

### How We Calculate Your Debt-to-Income Ratio

We add your debts – mortgage payment, loan payments, and minimum credit card payments – and divide it by your monthly salary. If you make a \$150 car payment, \$200 student loan payment, and \$1000 mortgage payment, and you have a \$4,000 monthly income, your debt-to-income ratio is 33 percent.

### How It Affects Your Mortgage Application

We want to know that you can afford your mortgage, and we want to see a DTI of less than 43 percent – preferably, even lower than that. We can use the mortgage payment as a variable in the calculation. With a monthly income of \$3,500, for instance, a total debt payment of \$1,505 would result in a 43 percent DTI. If your current loan and credit card payments are \$500, you could take on a mortgage of \$1,005 per month. This figure will include mortgage payment, property taxes, and insurance.