What is the formula to calculate the total debt-to-income ratio?

The total debt-to-income ratio is a crucial financial metric used to assess an individual's ability to manage monthly payments and repay debts. The correct formula for calculating this ratio is to take the total monthly debt obligations and divide that by the monthly gross income, then multiply by 100 to express it as a percentage.

This ratio provides insight into how much of a person's income goes towards paying off debts, which can help lenders evaluate risk when considering loan applications. A lower ratio typically indicates a healthier financial situation, as it shows that a smaller proportion of income is tied up in debt.

In contrast, the other choices do not represent the correct method for calculating the total debt-to-income ratio. The second option measures the ratio of income to expenses, which does not specifically address debt management. The third choice assesses the relationship between total assets and total liabilities, giving a snapshot of financial health but not focusing directly on income's role in servicing debt. The last option incorrectly uses annual income and focuses only on mortgages rather than total debt obligations.