To determine your DTI, simply add up the amount you spend each month on debt and divide it by your total monthly income. Multiply that number by 100 to come up with a percentage. The result is your debt-to-income ratio.

For example, let’s assume you make $3,000 a month. Let’s also assume you spend $300 on credit card payments and $450 on an auto loan. Your ratio calculation would be $750 divided by $3,000 which is equal to 0.25. Multiply that by 100 for a debt-income-ratio of 25%. In this example, you spend a quarter of your income on debt.

When it comes to debt, the lower the debt you have, the better.

Your total debt-to-income ratio, is best at 36% or lower. A ratio lower than 30% is excellent, while a ratio over 40% is a red flag for a potential financial disaster.

Most Mortgage lenders will lend with DTI's below 50% sometimes as high as 55%, but many limit a DTI to a max. of 45%.