Debit to Income Ratio
Your debt-to-income (DTI) ratio is the percentage of your monthly gross income that goes towards pay
Understanding your DTI
When processing your loan application, lenders will calculate your monthly debt expense, including future mortgage amount, and use this to determine your DTI. Generally, the lower your DTI ratio, the more likely you are to qualify for a mortgage.
Calculating your DTI
Your DTI ratio is calculated by dividing your debt by your income.
For example, if your monthly income is $4,000 and your monthly debt expense plus future mortgage amount is $1,320, your DTI ratio is 33%. Most mortgage options have specific DTI ratios.
How to reduce your DTI ratio
If you'd like to lower your DTI ratio, try:
- Reducing your outstanding debt
- Limiting your credit card usage