How to Calculate Total Debt Ratio

If your total debt ratio is too high, it may mean you will need to take out a smaller mortgage.

If your total debt ratio is too high, it may mean you will need to take out a smaller mortgage.

When a bank gives you a mortgage, it wants to be sure that you can afford your payments -- and frankly, you should want this too. One measure for estimating your ability to afford a home is your total debt ratio. According to the "National Residential Mortgage Loan Originator," the maximum total debt ratio allowed for most mortgages is 0.36. Any higher and most lenders won't give you the cash you need for your home.


Add up your total monthly debt liabilities. These are any debts, such as car loans, student loans and credit cards, that you need to pay each month. They do not include utilities or other variable expenses. For example, if you have a monthly car loan payment of $300, a monthly student loan of $200 and monthly credit card payments of $100, your total monthly debt liabilities would be $600.


Add up your total gross monthly income. This is income before taxes and other deductions. Include your gross income as well as your partner's. For instance, if you earn gross pay of $3,000 per month and your spouse earns gross pay of $2,800, your total gross monthly income would be $5,800.

Calculating the Ratio

Divide your total monthly liabilities by your monthly income to get your total debt ratio. With monthly liabilities of $600 and monthly income of $5,800, you would have a total debt ratio of 0.1034.

Expressing as a Percent

The total debt ratio can be expressed as a percentage to make it easy to understand. Simply multiply the ratio by 100 to express it as a percent. For instance, if you have a total debt ratio of 0.1034, you would multiply it by 100 to get 10.34 percent.



  • National Residential Mortgage Loan Originator; Debra Killian and Donald DeRespinis

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Dani Arbuckle is a successful business writer with expertise in general management and strategic management. Arbuckle is also an active runner and marathoner who writes extensively on running and other sports.

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