DTI Ratio (Debt-to-Income Ratio)

The Debt-to-Income (DTI) ratio measures how much of your monthly income goes toward paying debts, including loans, mortgages, credit cards, and other obligations. It's calculated by dividing your total monthly debt payments by your gross monthly income, then expressing it as a percentage. A lower DTI indicates you have manageable debt levels relative to your income, which is often viewed favorably by lenders when considering your ability to take on additional debt, like a mortgage. Generally, a DTI below 36% is considered healthy, while higher ratios may signal increased financial risk.