What is Debt-to-Income Ratio (DTI)?
Debt-to-income ratio compares a borrower’s total monthly debt payments to their gross monthly income, shown as a percentage. Lenders use it to judge whether a borrower can comfortably take on a mortgage. A lower DTI generally makes qualifying easier and may lead to better terms.
Example: A borrower earning $10,000 a month with $3,500 in total monthly debt (including the new mortgage) has a 35% DTI, which most lenders consider acceptable.