Debt-to-Income Ratio
The debt-to-income (DTI) ratio is a financial measure that compares an individual's total monthly debt payments to their gross monthly income. Lenders use this ratio to evaluate a borrower's ability to manage monthly payments and repay debts.
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What is Debt-to-Income Ratio?
DTI is calculated by dividing total monthly debt payments by gross monthly income. A lower DTI indicates a healthier financial situation, while a higher DTI may signal potential repayment issues.
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Calculating Your DTI
Add up all monthly debt payments and divide by gross monthly income.
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Why Debt-to-Income Ratio Matters
A low DTI can improve your chances of loan approval and may lead to better interest rates. Understanding your DTI helps in managing finances and planning for future borrowing.
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