Debt-to-Income Ratio

The Debt-to-Income (DTI) Ratio measures how much of your monthly income goes toward paying existing debts. It's calculated by dividing your total monthly debt payments (like rent, loans, and credit cards) by your gross monthly income (before taxes). A lower DTI indicates better financial health, suggesting you have enough income to manage additional debts comfortably. Lenders use DTI to evaluate your creditworthiness when you apply for loans or mortgages, as it helps them determine your ability to repay new debt without financial strain. A DTI below 36% is generally considered favorable.