DTI (Debt-to-Income Ratio)

The Debt-to-Income (DTI) ratio measures the percentage of your monthly income that goes toward paying debts. It's calculated by dividing your total monthly debt payments by your gross monthly income, then multiplying by 100. A lower DTI indicates better financial health, suggesting you have enough income to cover your debts. Lenders often use this ratio to decide whether to approve loans or mortgages, as it reflects your ability to manage monthly payments. Generally, a DTI below 36% is considered acceptable, but different lenders may have varying thresholds.