Debt-to-Income Ratio (DTI)

What is Debt-to-Income Ratio (DTI)?

A Debt-to-Income Ratio, or DTI is calculated by taking all of your monthly debt payments and divide the total by your gross monthly income. The result is a percentage called DTI ratio, and it must fall under a certain percentage for you to qualify for a loan.

This is how a bank or lender determines what you can afford to borrow. It is a way to determine your ability to pay back the loan based on your income and other debt obligations. The maximum DTI varies by lender, loan program, and investor. Generally:

DTI ratio under 36% is good and you will qualify for most loans given other conditions are acceptable.
DTI ratio between 36% to 49% is an indication that you should not borrow any more money and needs to work toward getting it down below 36%. However, you will still qualify for some loans and mortgages.
DTI ratio above 50% is risky. You need to actively work on reducing your debt.

How Much House Can I Afford to Buy?

July 1, 2020July 1, 2020 by Pinyo Bhulipongsanon

If you are thinking about buying a house, you might be wondering, “how much house can I afford?” There is a significant distinction between what the bank will lend you versus what you can afford to pay. In general, a good rule of thumb is to pay less than 25% of your income toward your monthly … Read more

How to Calculate Debt-to-Income Ratio (DTI Ratio)

August 19, 2019June 27, 2019 by Pinyo Bhulipongsanon

Debt-to-Income Ratio, or DTI ratio, is how a bank or lender determines what you can afford to borrow. It is a way to assess your ability to pay back the loan based on your income and other debt obligations. If your DTI ratio is too high, then you’re a risky borrower and may not qualify … Read more