### Debt to Income Ratio Example

Definition: Debt to Income (DTI) Ratio is used to calculate the percentage of a consumer's monthly income that goes toward paying debts, which can include certain taxes, fees, insurance premiums, car loans, credit card payments, etc.

Formula:

Debt to Income = Monthly fixed expenses / Gross monthly income

Example 1:
If you have Yearly Gross Income of \$24,000 and Monthly liabilities of \$200. Then, the Monthly Income would be: 24,000 / 12 = \$2,000 and the DTI ratio = 200 / 2,000 = 10%

Example 2:
If you earn \$3,000 per month and have a mortgage expense of \$500, taxes of \$300 and insurance expenses of \$100. Then, the debt-to-income ratio is: (500 + 300 + 100) / 3,000 = 0.3 = 30%

Example 3:
Calculate the DTI ratio, given the following information:
Car loan \$500
Personal loan \$100
Child support \$200
Credit card debt repayments \$300
House payments: Mortgage \$2,500
Home insurance \$200
Gross household income \$10,000

Solution:
Personal debt repayments = 500 + 100 + 200 + 300 = \$1,100
Total house payments = 2,500 + 200 = \$2,700
Total debts = Debt repayments + house payments = 1,100 + 2,700 = \$3,800
DTI ratio = 3,800 / 10,000 = 38%

* Next: Debt to Equity Ratio Formula & Example