Most people understand the concept of a debt to income ratio, but many don’t know what goes into the calculation and what is left out. Here’s a brief overview:
What Goes In:* Mortgages* Taxes, Insurance, and HOA fees in Real Estate* Credit Card Payments* Auto Loan or Lease Payments* Student Loan Debt Payments* Alimony, Child Support or Separate Maintence Income (Payments Only)* Installment Loan Payments* Other Leases* IRS and other Collection Payments
What Does Not Go In:* Utility Payments* Food* Gasoline* Entertainment Costs* Personal Health and Auto Insurance
I’m sure you can think of other types of expenses, but this is…in a nutshell…what banks use to determine Debt to Income Ratios.