Debt-to-Income Ratio (DTI)

Definition

Your debt-to-income (DTI) ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay money you plan to borrow. A lower DTI is generally preferred.

Example

If your gross monthly income is $5,000, and you have a $1,200 mortgage payment, a $300 car payment, and a $100 minimum credit card payment, your total monthly debt is $1,600. Your DTI is $1,600 / $5,000 = 32%.