The debt-to-income ratio measures how much income a person or business makes in order to service a loan. A high debt-to-earnings ratio means that a business or person receives a large amount of income without paying enough in interest or other charges. A low debt-to-earnings ratio makes an applicant more appealing to mortgage lenders and helps to guarantee approval.To calculate the debt-to-gross income ratio, take the gross monthly income of the applicant and divide it by the number of monthly debts (including mortgages) the applicant currently has. The resulting figure is the debt-to Gross Income Ratio. That percentage tells mortgage lenders what they can expect to receive if the applicant applied for a mortgage. Interest rates are important factors when determining the mortgage amount. The higher the mortgage amount, the greater the chance of a high debt-to-graphics ratio.Low debt-to-earnings ratio indicates that a person's prospects for building equity are favorable and they are a good risk for lending. The calculation should be divided by two, because a low dti may indicate the applicant will not earn enough in the future to pay back the mortgage. Mortgage rates are changing, so a monthly payment may not reflect the full mortgage rate. Mortgage rates are based on supply and demand, so if there are not enough homes for sale, mortgage rates will probably go up.Another way to calculate the debt-to-income ratio is based on the time period of the estimate. If the loan is for fifteen years, the expected income is approximately two thousand dollars. Calculate the annual salary to determine how much the person would earn at his or her current wage if they were unemployed or self-employed and borrow ten thousand dollars at their current interest rate to calculate the debt-to-page ratio.Many people don't like to calculate the debt-to-page ratio, but it is an important aspect of mortgage loans. Many lenders will penalize borrowers for having too high a ratio. The higher the data, the more risk the lender thinks the applicant poses. This risk is reflected in the interest rate and the terms of the mortgage loans.Many lenders have used ratios to establish the risk level that an applicant poses. If you have high debt-to-earnings ratios, you will be considered a high-risk customer. People with lower ratios will have better interest rates and terms. Lenders want to be able to attract people with balanced budgets and stable incomes.If you are self-employed, you can lower your interest rate by working with mortgage lenders. The lenders are willing to renegotiate the terms of your loan on your behalf. They may reduce your interest rate by as much as twenty percent. Or they might freeze your interest rate for a year. This is because you are seen as a greater risk than other borrowers. When you lower your dti ratio, you lower your risk and increase your monthly payments.Be careful when negotiating with your lender. If you have too high of a ratio, they could raise your interest rate even more. If you agree to a freeze on your interest rate, you may not be able to reduce your debt-to-income ratio. However, if you agree to a higher monthly payment in order to reduce your debt-to-home ratio, you can lower your payments. You must be able to prove to your lenders that you can afford your monthly payments.Be careful when negotiating with mortgage lenders regarding their credit score. Not all lenders look at your debt-to-income ratio in the same way. Some will look at your overall credit score before they look at your debt-to-income ratio. Lenders want to know how responsible you are and if you would make a good and reliable customer. Lowering your debt-to-income ratio by $50 but increasing your credit score by 200 points will cost you much more in the long run.Be wary of some mortgage lenders who will use inaccurate ratios in order to qualify you. They will look at your debt-to-income ratio and assume that you have lots of disposable income. When you answer back, they will ask if you have any collateral or assets that can be used as equity. If you are unable to provide any security, this will adversely affect your credit score.Most of us have several sources of debt. Our monthly gross income is usually sufficient to cover our basic expenses. But there are those times when emergencies occur and we fall behind on bills or our utilities go out. With a bad debt-to-income ratio, this can be a lot more problematic. There are some excellent online tools to help you calculate your monthly gross income and your debt-to-income ratio.