Debt-to-Income Ratio (DTI)
A measure of how much of your monthly gross income goes toward debt payments. Calculated by dividing your total monthly debt payments by your gross monthly income. Lenders use DTI to assess your ability to repay new debt. Most conventional mortgage lenders prefer a DTI below 43%.
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- Mortgage
A loan used to purchase or refinance real estate, where the property serves as collateral. Mortgages are installment loans with terms typically ranging from 10 to 30 years. Missing mortgage payments can lead to foreclosure. Minimum credit scores vary by loan type (FHA: 500, conventional: 620).
Frequently Asked Questions About Debt-to-Income Ratio (DTI)
What does Debt-to-Income Ratio (DTI) mean?
A measure of how much of your monthly gross income goes toward debt payments. Calculated by dividing your total monthly debt payments by your gross monthly income. Lenders use DTI to assess your ability to repay new debt. Most conventional mortgage lenders prefer a DTI below 43%.
Is Debt-to-Income Ratio (DTI) important for my FICO® score?
Understanding Debt-to-Income Ratio (DTI) helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.