DTI: Debt-to-Income Ratio

DTI is defined as your total monthly debt (made up of housing expenses, mortgages, credit card payments, student loans, vehicle loans, child support, ect.) divided by your gross monthly income.When it comes to applying for a mortgage, most people are aware that your credit score is a very important indicator on not only whether or not you will qualify for a loan, but also what your interest rate may be. What people don’t realize is that your debt-to-income ratio is equally as important! This number matters tremendously because it can give insight on whether you will be able to make payments on a mortgage and qualify. Studies show that borrowers with higher dti have more trouble being able to make their monthly mortgage payments!

When you’re in the market for a mortgage, you should be aware of your own DTI. To calculate it, you must take into account all of your monthly debt payments and divide the total by your gross monthly income (the amount of money you earn before taxes). For example, if you pay $1,500 a month for your mortgage, $100 a month for a credit card payment and $200 a month for a vehicle loan and $200 a month for a student loan, you pay a total of $2,000 per month toward debts. If your gross monthly income is $6,000, then your DTI ratio is 33%.

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