Hi Bogleheads! I've been trying to figure out my personal Debt to Income ratio and I have a little bit of confusion as to what to include for the actual debt portion...how do I include the following 3 costs...
1. HOA fees (I currently live/own my condo; I'm curious about this bec I have read to only include debts/payments that appear on your credit report and this doesn't show up as a line item on any of my credit reports).
2. Auto insurance and Personal Property insurance - or only home owners insurance? (Also, similar to HOA fees I'm curious about this bec these also do not show up as line items on any of my credit reports).
3. Mortgage taxes - my taxes are currently paid from an escrow account so do I just include my monthly total mortgage payment (which would include: principal, interest and escrow)?
Also, curious, do you all calculate your DTI monthly? For people that have income amounts that can change from month to month I would think you would need to do it on a monthly basis?
Thank you all! I feel like you all always give such good advice!
Calculating DTI [Debt to Income ratio]
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Re: Calculating DTI
I know it’s going to sound simple but I’d start with dividing my debts by my income. Don’t include hoa, insurance, and taxes - include debts (not monthly or annual expenses).
If your income is lumpy I’d include my income for the year or average annual income over last few years.
Not an exact science as we know.
If your income is lumpy I’d include my income for the year or average annual income over last few years.
Not an exact science as we know.
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Re: Calculating DTI
Ah okay, that's a good idea, thank you!
Re: Calculating DTI
for what purpose are you making the calculation?harvestmoon wrote: ↑Sun May 28, 2023 11:01 am I have read to only include debts/payments that appear on your credit report and this doesn't show up as a line item on any of my credit reports
Re: Calculating DTI
Don't know if this will be good advice, but for what it is worth:harvestmoon wrote: ↑Sun May 28, 2023 11:01 am Thank you all! I feel like you all always give such good advice!
- don't bother calculating DTI
- do bother calculating (and categorizing, at least roughly) annual expenses
- do bother estimating (roughly) your cash flow after retirement, and your invested balances (traditional, taxable, and Roth) at retirement
The two in the last line can help with
- where you will stand with regard to Safe withdrawal rates
- an informed guess at which of Traditional versus Roth contributions are likely to be a better choice for you now.
The Excel toolbox mentioned in your effective tax rates topic might also be useful for the purposes above.
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Re: Calculating DTI
If you want to know how lenders do it, you add up everything that appears on your credit report and divide by your pre-tax gross income (before any taxes or deductions.)harvestmoon wrote: ↑Sun May 28, 2023 11:01 am Hi Bogleheads! I've been trying to figure out my personal Debt to Income ratio and I have a little bit of confusion as to what to include for the actual debt portion...how do I include the following 3 costs...
1. HOA fees (I currently live/own my condo; I'm curious about this bec I have read to only include debts/payments that appear on your credit report and this doesn't show up as a line item on any of my credit reports).
2. Auto insurance and Personal Property insurance - or only home owners insurance? (Also, similar to HOA fees I'm curious about this bec these also do not show up as line items on any of my credit reports).
3. Mortgage taxes - my taxes are currently paid from an escrow account so do I just include my monthly total mortgage payment (which would include: principal, interest and escrow)?
Also, curious, do you all calculate your DTI monthly? For people that have income amounts that can change from month to month I would think you would need to do it on a monthly basis?
Thank you all! I feel like you all always give such good advice!
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- Posts: 40
- Joined: Mon Sep 06, 2021 1:23 am
Re: Calculating DTI
I really enjoy reading the different replies and perspectives. As someone who is not a very savvy investor, but trying to learn, it really helps for me to read all of these responses.