Debt-to-Income Ratio (DTI)

The Debt-to-Income Ratio (DTI) is a financial measure used to assess an individual's ability to manage monthly debt payments relative to their gross monthly income. It is calculated by dividing total monthly debt payments—such as rent, mortgage, and loans—by gross monthly income. A lower DTI indicates better financial health, as it shows a smaller portion of income is being used for debt repayment. Lenders often use DTI to evaluate borrowing risk; typically, a DTI below 36% is considered desirable for loans or mortgages.