The basic formula

Add the monthly debt obligations included in the calculation, divide that total by gross monthly income, and multiply by 100. Gross income generally means income before taxes and other deductions.

For example, $1,800 in included monthly payments divided by $6,000 in gross monthly income equals 30%. If gross income varies, a single month's figure may be misleading; organize a longer record and ask the reviewing institution how it treats variable income.

Create a transparent worksheet

Separate verified figures from estimates. Record each amount, its source, and the date it was checked. This makes it easier to update your worksheet and explain differences between your calculation and a third party's calculation.

  • List recurring debt payments shown on statements or credit reports.
  • Record housing separately so you can compare worksheets that include or exclude it.
  • Use gross income documentation that matches the time period you are analyzing.
  • Keep irregular expenses in your broader budget even when they are not part of a lender's DTI formula.

Why two correct calculations can differ

A mortgage review may distinguish front-end and back-end ratios. Another product may use only certain reported obligations. Treatment of alimony, child support, business debt, co-signed debt, or variable income may depend on the institution and documentation.

That is why Funding Society does not label a ratio as an approval threshold. Ask the provider which obligations and income sources it includes, what documentation it requires, and whether its calculation uses current or proposed payments.

Use DTI alongside a cash-flow budget

DTI does not show taxes, food, utilities, insurance, transportation, child care, or emergency savings. A ratio can look manageable while the monthly budget remains tight. Pair the ratio with a cash-flow review that includes essential expenses and a reserve for unexpected costs.

Before taking on a new payment, test more than one scenario. Compare the payment at different rates or terms, then consider whether the remaining cash flow is durable rather than merely positive.