What is debt-to-income ratio?

Debt-to-income (DTI) ratio is a personal finance measure that compares an individual’s monthly debt payment to their monthly gross income. Your gross income is your pay before taxes and other deductions are taken out. The debt-to-income ratio is the percentage of your monthly gross income that goes to paying your monthly debt payments.

How do you calculate debt to income ratio?

Now divide your total recurring monthly debt by your gross monthly income. The quotient will be a decimal; multiply by 100 to express your debt-to-income ratio as a percentage. Your debt-to-income ratio, along with your credit score, is one of the most important factors lenders consider when you apply for a loan. Can You Afford That Big Purchase?

Do I need to know my debt-to-income ratio?

You need to know this number if you're going for a mortgage. Your debt-to-income ratio (DTI) is a personal finance measure that compares the amount of debt you have to your gross income. You can calculate your debt-to-income ratio by dividing your total recurring monthly debt by your gross monthly income