Your debt to income ratio is the amount of monthly debt you pay out in contrast to how much income you have coming in. Start by figuring the easy part-your income. If you are on a structured paycheck, then it will be easy-simply calculate your monthly salary. If you work on a commission or other type of varying income, total your last six month's earnings and divide by six.
Now you will need to figure your monthly debt. You should total your car payment, credit card payments (use the minimum amount payments for this calculation, even if you pay more), any other monthly debt-such as child support payments-along with the estimated amount of your new mortgage payment.
Now, take the total of your debt payments and divide it by your income and you will have your debt to income ratio. Most lenders will want to see no higher than a 36 percent debt to income ratio, although there are a few exceptions.
If you find that your debt to income ratio is so high that you may not be able to quality for a mortgage, you should try to pay down some of it before applying for your loan. This will not only better your chances for a mortgage loan, but it will also ensure that you quality for one with better interest rates and terms.
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Carrie Reeder is the owner of , an informational website with articles and the latest news about various types of loans.