Does my solar loan change my Debt To Income (DTI) Ratio?

Yes — all loans or lease payments change your debt to income ratio. Let’s talk about how it works.

If your house payment is $1800 including property taxes and insurance. Your car payment is $300, your student loan payments are $200 and your credit card payments are $100, your total monthly payments are $2400 per month. All I did here was add them up.

Now, if your income is $7000 per month, your debt to income ratio is 34.3%. All we did was divide your total monthly payments by your total before tax monthly income. That is 2400/7000 = .343 or 34.3%.

Let’s say you want to get some solar panels (good idea) and you want to borrow or lease the panels. OK, there’s a payment right? If the payment is $250 per month, your debt to income ratio will go up.

Now your total payments per month are $2650. Your income is the same — $7000. Your debt to income ratio increased to 37.9%. We get that by dividing 2650 by your pretax monthly income of $7000–2650/7000 = .379 or 37.9%.

That’s all there is to it.

Want me to calculate your debt to income ratio and see if you qualify? Click here.