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What is debt to income ratio?

What is debt to income ratio? How is it used?
Asked By Ethan | Springfield, MO | 711 views | Terms Definitions | Updated 2 years ago
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Pro
123 Answers
Chris Yochum

Dickson Realty

(24)

Debt to income is calculated on how much you make monthly or annually and what your current debt payments look like. For instance, if you make $1,000 a month and your car payment, school loans and credit card payments is $500 all together then your debt to income is at 50%. The lower your debt is the better.
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Lisa and Greg Harris

eXp Realty, LLC

(42)

A lender uses the debt-to-income ratio to determine the ability to qualify for a home loan. Most lenders have requirements of certain percentages based on the type of loan the buyer qualifies for, such as a VA loan, an FHA loan, Conventional loan. It is the total of all of your creditor bills compared to your income. In most cases with most loans the DTI or Debt to income ratio needs to be below 52% but it is all based on the lender requirements and the loan types.

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Rising Star
26 Answers
Joanne Patience

Iron Valley Real Estate North Florida

(5)

Debt to income ratio is a financial calculation that measures the percentage of your pre-tax income that goes towards your monthly debt payments. Lenders use this figure to assess your ability to repay a loan, which is essential in determining whether you will be approved for financing. Please speak with a Mortgage Broker / Loan Officer, for they have various loan programs based on the debt-to-income ratio.
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Rising Star
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Sami Vecchiolla

COMPASS GREATER NY LLC

(16)

DTI is a ratio used to determine how much your able to borrow. All of your debts on a monthly basis are subtracted from all of your income. The lower debt to income ratio the better.

More Information

  • What is debt-to-income ratio?

    Debt-to-income ratio (DTI) is all your monthly payments for debt divided by your monthly income.  Lenders use this information to assess your credit worthiness. 

    A lower DTI makes you a more attractive borrower. Therefore, you will be eligible for a larger loan amount at a lower interest rate.  

    Whereas a high DTI indicates that a large portion of your income goes toward repaying debts. That money cannot go towards another payment, like a home loan.  

    If you're thinking of purchasing a house within the next year, strive to eliminate as much debt as possible.  While this can be difficult to do when also saving for a downpayment, it will make you a more attractive borrower.  



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