What Is Debt-to-Income Ratio?

Debt-to-income ratio (DTI) is an aspect of personal finance used to indicate your expenses. DTI is calculated as the percentage of gross monthly income used to pay monthly debt payments. Your DTI ratio is used by lenders, including when you apply for a mortgage, to measure your ability to manage your monthly repayments.

DTI acts as a measurement of how capable you are of paying back future loans, and a maximum DTI limit is often set by lenders or government backers. Those who have too much debt (a high DTI) may not be able to get a mortgage to purchase a house.

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Be sure to know your own DTI when you apply for a mortgage. You should do your best to pay off your loans and reduce your DTI before taking on a new obligation such as a mortgage loan.